FDPA

Question 1

What is the FDPA?

Answer 1

Flood Disaster Protection Act

Question 2

The FDPA prohibits federally regulated lending institutions from ___________________.

Answer 2

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

Question 3

T or F

Flood insurance requirements are triggered by certain types of loans?

Answer 3

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)

Question 4

Property that can be covered by flood insurance includes all personal property securing the loan but does not include ____________.

Answer 4

the land itself

Question 5

What loans/property are expect from flood insurance requirements?

Answer 5

* 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)

Question 6

Lenders may not make a government-guaranteed or insured loan secured by improved property in a special flood hazard areas unless ___________.

Answer 6

the community participates in the National Flood Insurance Program (NFIP)

Question 7

Hotels are classified as ‘residential buildings’ for flood insurance purposes if ___________.

Answer 7

normal occupancy of a guest is six months or more

Question 8

Residential property that is not a primary residence can have flood insurance rate increases of _________.

Answer 8

up to 25% a year

Question 9

Primary residences can have flood insurance rate increases from ___________.

Answer 9

5% to 25% a year

Question 10

How does a lender determine if a property is located in a Special Flood Hazard Area (SFHA)?

Answer 10

using the NFIP maps managed by FEMA

Question 11

T or F

Banks may charge a reasonable fee for flood determination?

Answer 11

TRUE

Question 12

Are flood determination fees considered a finance change under Reg Z?

Answer 12

NO

but life-of-loan coverage is considered a finance change under Reg Z

Question 13

What form must banks use to document whether or not a property is located in a SFHA?

Answer 13

Standard Flood Hazard Determination Form (SFHDF)

Question 14

When can a previous flood determination be reused?

Answer 14

* 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

Question 15

Are loan acquisitions through table funded transactions subject to flood insurance regulations?

Answer 15

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

Question 16

Do loan purchases or loan participations trigger flood regulatory requirements?

Answer 16

NO

Question 17

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 ___________.

Answer 17

the borrower and loan servicer

Question 18

Must the bank always be the one to provide flood insurance notices?

Answer 18

NO

notice may be given by seller or lessor if adequate written assurances of delivery is given to bank

Question 19

What are the notice requirements for properties located in a SFHA?

Answer 19

* 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

Question 20

When must flood notices be mailed or delivered to the borrower?

Answer 20

within a reasonable time before completion of the transaction but no later than the bank sends other notices concerning insurance or taxes

Question 21

For loans with multiple applicants, which borrower receives the flood notices?

Answer 21

lender decides

Question 22

Who must the bank notify of the identity of a loan servicer for loans in a SFHA?

Answer 22

FEMA (or its designee) AND insurance agent

Question 23

How long does the bank have to notify required parties of a change in servicer?

Answer 23

60 days after the effective date of the change

Question 24

On what loans must lenders escrow flood insurance premiums and fees?

Answer 24

loans made, increased, extended, or renewed after January 1, 2016 that do not fall into an exception

Question 25

On what loans must lenders provide the options of escrowing flood insurance premiums and fees?

Answer 25

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.

Question 26

Flood insurance amounts must be maintained for the life of loan and must be, at a minimum, ____________.

Answer 26

equal to the lessor of

• the outstanding principal balance of the loan
• the insurable value of the property
• the maximum limit of available coverage

Question 27

If flood insurance is not provided or lapses, banks may force place insurance on the expiration of _____________ and coverage should date back to ______________.

Answer 27

45 days from the notification

date the coverage lapsed

Question 28

If the lender force places insurance, they may charge the borrower _____________.

Answer 28

the premium amount including coverage from lapse date to force place date

Question 29

If borrower provides proof of flood insurance coverage after lender force places a policy, the lender must ____________________.

Answer 29

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

Question 30

Must a bank review its portfolio to identify uninsured or underinsured loans?

Answer 30

NO

However, if a bank discovers a loan not meeting the requirements it must notify the borrower and force place as necessary.

Question 31

Must a bank monitor and/or track flood map changes?

Answer 31

NO

However, if a bank discovers a loan not meeting the requirements it must notify the borrower and force place as necessary.

Question 32

Are buildings in the course of construction flood insurable?

Answer 32

YES

unless construction has been halted for more than 90 days and/or if the lowest floor is below the base flood elevation (BFE)

Question 33

Are materials for construction flood insurable?

Answer 33

YES

but only if they are in an enclosed building on the premises or adjacent to the premises

Question 34

Must the lender require flood insurance at the time of loan origination for construction loans?

Answer 34

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.

Question 35

Under what policy must condominiums be insured?

Answer 35

• either each individual unit must be separately insured OR
• the whole building can be insured under a Residential Condominium Building Association Policy (RCBAP)

Question 36

What is the maximum coverage for a RCBAP?

Answer 36

• 100% of the replacement cost value of the building OR
• $250,000 for each unit in the building

Question 37

What are the flood insurance requirements for Other Residential Loans (5+ Family)?

Answer 37

the lesser of;

* outstanding principal balance of loan

* maximum limit of $500,000 OR

* insurable value allocated to that structure

Question 38

May borrowers dispute flood insurance determinations?

Answer 38

YES

owners and lenders may jointly request FEMA to review a determination with a Letter of Determination Review (LODR)

Question 39

What are the general record retention requirements for FDPA?

Answer 39

retain sufficient records of compliance during the life of the loan

Question 40

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 _________________.

Answer 40

the lender has reasonable controls in place to assure that the insurance will be purchased when walls and a roof are in place

Question 41

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.

Answer 41

TRUE

Question 42

What is required for proof of flood hazard insurance?

Answer 42

a copy of the declaration page of the insurance policy

Question 43

What is the bank’s penalty for not having a Standard Flood Hazard Determination Form completed before loan consumation?

Answer 43

$2,000 per violation

Question 44

If you are relying on a previous flood determination, that determination must have been completed ___________.

Answer 44

by you or for you for the same property

(same lender, same property)

Question 45

T or F

Flood insurance is not required on applicable loans for a second lien if the first lienholder never required it.

Answer 45

FALSE

For applicable loans, borrowers are required to obtain flood insurance that fully covers the property including both liens.