The regulatory landscape for financial institutions continues to evolve, presenting both challenges and opportunities. Recent discussions with our clients have highlighted three critical areas: flood insurance issues during government shutdowns, the uncertain impacts of executive orders on compliance, and the National Automated Clearing House Association’s (Nacha) automation of requests for documentation of annual Automated Clearing House (ACH) audit completion. Here's what you need to know about these three critical issues.
Flood Insurance & Government Shutdowns
The ongoing government shutdown has created notable challenges for institutions managing flood insurance requirements. FEMA’s updated flood maps, effective December 2025, have expanded flood hazard areas, necessitating a review of existing loans and properties. However, the shutdown has halted the National Flood Insurance Program (NFIP), leaving institutions unable to secure new or force-placed flood insurance policies.
Despite these limitations, regulators have clarified that institutions can still originate loans for properties in flood zones without immediate flood insurance coverage. FAQ #12 in the flood insurance guidelines (Loans in Areas Having Special Flood Hazards; Interagency Questions and Answers Regarding Flood Insurance) explicitly permits this, provided institutions assess safety and soundness risks. For example, refinancing loans with existing force-placed policies may proceed without additional coverage, as long as the current policy remains valid. Institutions are encouraged to explore private flood insurance options to mitigate risks, though availability and policy acceptance may vary.
The key takeaway for compliance teams is to balance regulatory allowances with institutional risk tolerance. While the shutdown permits flexibility, institutions must remain vigilant about potential exposure, especially if properties are affected by flooding during this period.
Executive Orders & Compliance Uncertainty
Recent executive orders have introduced ambiguity into compliance practices, particularly around fair lending and disparate impact analysis. Executive Order 14281, “Restoring Equality of Opportunity and Meritocracy,” removed disparate impact considerations from federal fair lending examinations, shifting the focus to disparate treatment and overt discrimination. Agencies like the FDIC, Office of the Comptroller of the Currency (OCC), and U.S. Department of Housing and Urban Development (HUD) have already implemented this change, while the Federal Reserve awaits updates to the Federal Financial Institutions Examination Council (FFIEC) examination manual.
This shift raises questions about institutional risk. While federal agencies may deprioritize disparate impact, state-level enforcement and private litigation remain viable. Consumer advocacy groups argue that existing laws, such as the Civil Rights Act of 1964 and Fair Housing Act of 1968, still allow individuals to sue for disparate impact claims. Conversely, business groups suggest the executive order could provide a defense against such lawsuits.
Institutions are encouraged to navigate this evolving space with informed judgment and collaborative review. Compliance teams should evaluate their risk tolerance and consider maintaining robust internal auditing processes to address potential disparate impact claims, even if federal examinations no longer prioritize them. In addition, Executive Order 14331, “Guaranteeing Fair Banking for All Americans,” which prohibits debanking based on political or religious affiliations, underscores the need for institutions to review policies and historical actions to support efforts to remain compliant.
Nacha Automates Audit Proof Requests
In a move to support more efficient compliance processes, Nacha has automated requests for proof of annual ACH audit completion through its Risk Management Portal. Previously, these requests were manual and limited to a small number of institutions. The new system increases the likelihood of being audited, emphasizing the importance of timely and accurate compliance.
Institutions should ensure their ACH teams are aware of this change and have completed the required self-audits. Operations Bulletin #3-2025 outlines the new process, which began in October 2025. This automation reflects a broader trend toward leveraging technology for compliance, reducing administrative burdens while increasing oversight.
Action Steps for Financial Institutions
- Flood Insurance: Review FEMA’s updated flood maps and assess the impact on existing loans. Consider private insurance options and evaluate risk tolerance for originating loans without NFIP coverage.
- Executive Orders: Monitor state-level enforcement and legal developments related to disparate impact. Maintain internal review procedures to address potential risks and ensure compliance with Executive Order 14331.
- Nacha Compliance: Perform annual ACH audits and familiarize teams with the automated proof request process to avoid penalties.
By staying proactive and informed, financial institutions can navigate these regulatory challenges while maintaining compliance and intending to reduce risk exposure.
How Forvis Mazars Can Help
Join us in person to learn more about how we can help your financial institution tackle issues. At our annual 2026 AML/CFT/BSA & Fraud Compliance Conference from May 12 through May 14, 2026 in Sandestin/Miramar Beach, Florida, we’ll identify current and emerging Anti-Money Laundering (AML), Countering the Financing of Terrorism (CFT), Bank Secrecy Act (BSA), and fraud risks.
Forvis Mazars is designed to help financial institutions stay current on regulatory compliance and new developments that impact operations. To learn more, reach out to a professional at Forvis Mazars.
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