Regions Financial has been ordered to pay nearly $3 million for flood insurance violations that occurred several years ago. It's believed to be the largest penalty the Federal Reserve has ever imposed for that kind of infraction.
The Birmingham, Alabama-based regional bank did not effectively track whether some of its home equity loans and lines of credit were complying with federal flood insurance regulations, the Fed said Tuesday in an enforcement action.
The bank had identified the issue and bolstered its compliance by 2017, according to the Fed.
In a statement, Regions said that it self-identified the issue years ago and has long since fixed it.
"There was no customer impact as the matter was confined to our own internal monitoring of flood insurance policies on certain properties," the $156 billion-asset bank said. "Today, years after correcting the issue, we are pleased to now fully resolve this legacy matter."
The violations surround the National Flood Insurance Program, a program that provides federally backed flood insurance in areas where risks are significantly higher for private insurers.
Federal regulations prohibit banks from making real estate loans in special flood hazard areas where a community participates in the program — unless the property has flood insurance.
The Fed said that Regions didn't "effectively monitor a significant number" of home equity loans and home equity lines of credit for compliance with federal laws. The shortcomings took place for more than one year and were the "result of changes in loan servicing platforms and third-party service providers," the order said.
Banks can face civil penalties of up to $2,000 for each violation.
Flood insurance-related violations aren't uncommon, but the nearly $2.95 million penalty against Regions is far larger than the fines that regulators usually impose against smaller banks. Most of the money will go to the U.S. Treasury Department, while $58,000 will go toward the National Flood Mitigation Fund.
Last year, federal bank and credit union regulators
