New York Amends Recently Enacted Flood Insurance Requirements and Restrictions for Loans Secured by Residential Real Property

New York State Governor Kathy Hochul has signed a chapter amendment to the recently enacted flood insurance requirements and restrictions applicable to mortgages secured by residential real property (the “Chapter Amendment”). In December 2024, New York enacted a law restricting the amount of coverage a mortgagor may be required to purchase or pay for flood insurance and mandated a flood insurance disclosure be provided to a mortgagor when the mortgagor is required to purchase or pay for flood insurance on a loan secured by residential real property. We addressed that law in an Advisory in December. The Chapter Amendment, signed on February 14, 2025, amends the amount a mortgagor may be required to purchase or pay for flood insurance and modifies the required language of the flood insurance disclosure. The Chapter Amendment also extends the effective date of the new law from December 13, 2024, to March 13, 2025.

The Chapter Amendment revises the limit on flood insurance coverage amounts set forth in Section 283 of the New York Real Property Law (“Section 283”) by including the replacement value of the residential real property. Section 283 will now prohibit any mortgagee from requiring that a mortgagor to whom the mortgagee makes, increases, extends, or renews any loan or line of credit secured by improved residential real property to purchase or pay for flood insurance on such residential real property:

1. at a coverage amount that exceeds the lesser of the replacement value of the residential real property or the outstanding principal mortgage balance as of the beginning of the year for which the policy shall be in effect; or
2. that includes coverage for contents.

The Chapter Amendment also modifies the language of the required flood insurance disclosure, removing the portion of the flood insurance notice text that refers to the flood insurance minimum coverage only protecting the interest of the creditor or lender. The revised notice reads as follows:

“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 your losses in the property due to the 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.”

Please note that the Chapter Amendment unfortunately does not address a conflict between the new law and federal flood insurance requirements applicable to lenders. Federal regulations generally require lenders to require borrowers to obtain flood insurance on contents when the contents are taken as collateral, the contents are located in a building that is also collateral for the loan, and the building is in a special flood hazard area. Nonetheless, Section 283 continues to prohibit mortgagees from requiring flood insurance that includes coverage for contents.

This advisory is a general overview of the Chapter Amendment and is not intended as legal advice. If you have any questions about the Chapter Amendment or flood insurance requirements in general, please feel free to contact Joseph D. Simon at (516) 357-3710 or via email at jsimon@cullenllp.com, Elizabeth A. Murphy at (516) 296-9154, or via email at emurphy@cullenllp.com, David Curatolo at (516) 357-3733 or via email at dcuratolo@cullenllp.com, or Gabriela Morales at (516) 357-3850 or via email at gmorales@cullenllp.com.