FDPA Flashcards
What is the FDPA?
Flood Disaster Protection Act
The FDPA prohibits federally regulated lending institutions from ___________________.
making, increasing, extending, or renewing loans secured by buildings or mobile homes located in or to be located in a special flood hazard area of a community participating in the National Flood Insurance Program, unless the real and personal property securing the loan is covered by flood insurance
T or F
Flood insurance requirements are triggered by certain types of loans?
FALSE
flood insurance requirements are triggered by collateral, not the purpose of the loan (includes HELOC, second mortgages, securities taken as an abundance of caution)
Property that can be covered by flood insurance includes all personal property securing the loan but does not include ____________.
the land itself
What loans/property are expect from flood insurance requirements?
* loans that have an original principal balance of $5,000 or less AND an original prepayment term of one year or less
* any state-owned property covered under a policy of self-insurance satisfactory to the Director of FEMA
* any structure that is part of a residential property, but is detached from the primary residential structure and does not serve as a residence (but the lender may require insurance on detached structures if it so chooses)
Lenders may not make a government-guaranteed or insured loan secured by improved property in a special flood hazard areas unless ___________.
the community participates in the National Flood Insurance Program (NFIP)
Hotels are classified as ‘residential buildings’ for flood insurance purposes if ___________.
normal occupancy of a guest is six months or more
Residential property that is not a primary residence can have flood insurance rate increases of _________.
up to 25% a year
Primary residences can have flood insurance rate increases from ___________.
5% to 25% a year
How does a lender determine if a property is located in a Special Flood Hazard Area (SFHA)?
using the NFIP maps managed by FEMA
T or F
Banks may charge a reasonable fee for flood determination?
TRUE
Are flood determination fees considered a finance change under Reg Z?
NO
but life-of-loan coverage is considered a finance change under Reg Z
What form must banks use to document whether or not a property is located in a SFHA?
Standard Flood Hazard Determination Form (SFHDF)
When can a previous flood determination be reused?
* the determination is less than 7 years old AND
* there is no new or revised map revisions AND
* the original determination was recorded on the SFHDF
Are loan acquisitions through table funded transactions subject to flood insurance regulations?
YES
loans from brokers or third parties through table funded transactions are deemed extensions of credit because the party advancing the funds is treated as the originator
Do loan purchases or loan participations trigger flood regulatory requirements?
NO
When making, increasing, renewing or extending a loan secured by a property in or to be located in an SFHA; notice is required to be sent to ___________.
the borrower and loan servicer
Must the bank always be the one to provide flood insurance notices?
NO
notice may be given by seller or lessor if adequate written assurances of delivery is given to bank
What are the notice requirements for properties located in a SFHA?
* FEMA-approved warning that structure is or will be located in an SFHA
* description of purchase requirements
* a statement of whether federal disaster relief is available in event of damage to property
* statement that coverage is available from private companies or NFIP and encourage comparison
* escrow options as required
When must flood notices be mailed or delivered to the borrower?
within a reasonable time before completion of the transaction but no later than the bank sends other notices concerning insurance or taxes
For loans with multiple applicants, which borrower receives the flood notices?
lender decides
Who must the bank notify of the identity of a loan servicer for loans in a SFHA?
FEMA (or its designee) AND insurance agent
How long does the bank have to notify required parties of a change in servicer?
60 days after the effective date of the change
On what loans must lenders escrow flood insurance premiums and fees?
loans made, increased, extended, or renewed after January 1, 2016 that do not fall into an exception
On what loans must lenders provide the options of escrowing flood insurance premiums and fees?
loans made, increased, extended, or renewed before January 1, 2016 that do not fall into an exception and the notice must be sent before June 15, 2016.
Flood insurance amounts must be maintained for the life of loan and must be, at a minimum, ____________.
equal to the lessor of
- the outstanding principal balance of the loan
- the insurable value of the property
- the maximum limit of available coverage
If flood insurance is not provided or lapses, banks may force place insurance on the expiration of _____________ and coverage should date back to ______________.
45 days from the notification
date the coverage lapsed
If the lender force places insurance, they may charge the borrower _____________.
the premium amount including coverage from lapse date to force place date
If borrower provides proof of flood insurance coverage after lender force places a policy, the lender must ____________________.
notify the insurer to terminate the force places coverage and refund any premium covering the overlapping period to the borrower within 30 days of receiving evidence of borrowers coverage
Must a bank review its portfolio to identify uninsured or underinsured loans?
NO
However, if a bank discovers a loan not meeting the requirements it must notify the borrower and force place as necessary.
Must a bank monitor and/or track flood map changes?
NO
However, if a bank discovers a loan not meeting the requirements it must notify the borrower and force place as necessary.
Are buildings in the course of construction flood insurable?
YES
unless construction has been halted for more than 90 days and/or if the lowest floor is below the base flood elevation (BFE)
Are materials for construction flood insurable?
YES
but only if they are in an enclosed building on the premises or adjacent to the premises
Must the lender require flood insurance at the time of loan origination for construction loans?
NO
There are ways for the borrower to defer purchase of flood insurance but coverage is required no later than when the foundation is poured or the elevation certificate is issued.
Under what policy must condominiums be insured?
- either each individual unit must be separately insured OR
- the whole building can be insured under a Residential Condominium Building Association Policy (RCBAP)
What is the maximum coverage for a RCBAP?
- 100% of the replacement cost value of the building OR
- $250,000 for each unit in the building
What are the flood insurance requirements for Other Residential Loans (5+ Family)?
the lesser of;
* outstanding principal balance of loan
* maximum limit of $500,000 OR
* insurable value allocated to that structure
May borrowers dispute flood insurance determinations?
YES
owners and lenders may jointly request FEMA to review a determination with a Letter of Determination Review (LODR)
What are the general record retention requirements for FDPA?
retain sufficient records of compliance during the life of the loan
Construction loans require flood insurance if the building will be located in a special flood hazard area, but the insurance does not have to be in place on or before loan closing as long as _________________.
the lender has reasonable controls in place to assure that the insurance will be purchased when walls and a roof are in place
T or F
Notice of special flood hazard is required even if the community where the property is located does not participate in the NFIP and federal flood insurance is not required.
TRUE
What is required for proof of flood hazard insurance?
a copy of the declaration page of the insurance policy
What is the bank’s penalty for not having a Standard Flood Hazard Determination Form completed before loan consumation?
$2,000 per violation
If you are relying on a previous flood determination, that determination must have been completed ___________.
by you or for you for the same property
(same lender, same property)
T or F
Flood insurance is not required on applicable loans for a second lien if the first lienholder never required it.
FALSE
For applicable loans, borrowers are required to obtain flood insurance that fully covers the property including both liens.
