The New York Assembly Bill A5073, passed in the 2024 legislative session, has been signed into law...
If you’ve been actively following New York Assembly Bill A5073, you now have a tiny bit more clarity with the passage of New York Senate Bill S2670. This new bill amends A5073 with two key updates.
1. Clarification of Flood Insurance Limits
The original A5073 Bill prohibited mortgage lenders in New York from requiring residential property owners to purchase flood insurance exceeding the outstanding principal mortgage balance at the start of the year or including coverage for personal property contents.
S2670 clarifies this regulation to state that lenders cannot require residential property owners to purchase flood insurance coverage exceeding the loan balance or the replacement cost value if it is less than the loan balance. Lenders are also still prohibited from requiring contents coverage for personal property.
The stated intent of this revision is to bring the rule in line with federal regulations, however all this revision does is state that you cannot overinsure a property if the loan balance exceeds the homes value. Read our original blog post on NY Assembly Bill A5073 to learn more about ongoing conflicts with federal regulations.
2. Revised Flood Insurance Disclosure Requirements
The bill also updates the language lenders must use in flood insurance notices to mortgagors, removing the previous requirement that stated the lender was only requiring flood insurance to protect its own interest.
Under S2670, lenders must now inform borrowers that the required policy may not cover all repair costs or personal property losses in the event of a flood. The notice must also encourage borrowers to consider additional coverage for full protection of their property and belongings.
Example Verbiage:
“The flood insurance we are requiring you to purchase may not be sufficient to pay for many needed repairs after a flood and may not compensate you for losses to your property due to a flood. If you wish to protect your home or investment, you may wish to purchase more flood insurance than the amount we are requiring you to buy.”
Effective Date
This bill was signed on February 14 and will go into effect on May 15. The AFR compliance team will continue to monitor updates and provide further insights as they become available.
