Flood Flashcards
What are the record retention requirements for flood insurance?
A. 7 years
B. 5 years
C. Term of the loan
D. Term of the loan plus 5 years
C. Term of the loan
The bank should retain sufficient records of compliance during the term of the loan.
When is the mandatory flood insurance requirement?
A. Make, increase, renew, or extend
B. Mortgage, increase, renew, or extend
C. Make, increase, re-fi, or extend
D. Mortgage, increase, re-fi, or extend
A. MIRE: Make, increase, renew, or extend
Lender must require flood insurance when making, increasing, renewing or extending a designated loan.
*If a property is no longer in a SFHA due to a map change, the lender may drop the requirements.
What must a lender have to prove there is insurance on a loan?
A. ACORD 28 “Evidence of Property Insurance”
B. Full insurance policy
C. Declarations page with property description & agent contact information
D. Insurance certificate with property description & agent contact information
C. Declarations page with property description & agent contact information
Does the Notice of Flood Hazard have to be signed?
Yes, it’s one of the few regulations that require borrower acknowledgement.
The compliance officer gets a call from the head of the mortgage department who informs the compliance officer that they are planning to make a second lien mortgage loan on a residence. The property is located in a Special Flood Hazard Area requiring flood insurance, but the customer is objecting to getting flood insurance. The customer says that the first lienholder never required it, so why is our bank requiring it. The compliance officer should tell the mortgage department head
a. If the first lienholder didn’t require the flood insurance, we, the second lienholder, don’t have to either
b. We need to require the borrower to obtain flood insurance that fully covers the property including the first lien loan balance
c. We need to require the borrower to obtain flood insurance that covers our second lien loan amount
d. We cannot make the loan, because the first lienholder did not properly require flood insurance
b. We need to require the borrower to obtain flood insurance that fully covers the property including the first lien loan balance
What are lenders’ monitoring responsibilities under the Flood Disaster Protection Act, or FDPA ?
A. Flood maps
B. Policies
C. Flood maps and policies
D. Flood maps, policies, and credit scores
B. Policies
Which of the following loans does NOT require flood insurance?
- Loan A is a commercial loan that has been on the books for 2 years and has been renewed twice. Flood insurance was legally required on the loan at the time it was made. There was a flood insurance policy in effect at the loan’s inception, but it expired and was not renewed.
- Loan B is a consumer loan secured by a mobile home that is located in a flood hazard area in which federal flood insurance is not available.
- Loan C is a commercial loan that the bank would be willing to make on an unsecured basis, but the borrower has offered some commercial real estate property as collateral. The property being purchased has one vacant building on it, and it is in a flood hazard area in a community where federal flood insurance is available.
a. Loan A
b. Loan B
c. Loan C
d. None of the loans
b. Loan B.
The properties securing Loans A and C are located in SFHA and in communities where federal flood insurance is available; therefore, flood insurance is required. Loan A is required to have flood insurance for the entire term. The bank must check at each renewal to make sure the insurance is still in effect.
For construction loans, if the flood insurance for the property isn’t purchased at the time of loan origination, when must the flood insurance be purchased? Select all that apply
A. When the foundation slab has been poured
B. When the construction gets final permits
C. When an elevation certificate is issued
D. If the lowest floor is below the Base Floor Elevation, when it is walled and roofed
A, C, and D
The borrower may defer the purchase of flood insurance until a foundation slab has been poured, an elevation certificate has been issued, or in the case of a building where the lowest floor is below the BFE, when it is walled and roofed.
Controls must be in place to ensure that the borrower obtains insurance no later than when the triggering event occurred. The lender must also require flood insurance before the lender disburses funds to pay for building construction (except as necessary to pour the slab or perform preliminary site work such as laying utilities, clearing brush, or the purchase and/or delivery of building materials) on the property securing the loan.
Assume that the properties involved in the following loans are located in SFHA. Which loans would NOT require flood insurance as a condition of the loan?
a. A mortgage loan made to a consumer secured by a residence in a community in which flood insurance is available
b. A commercial loan secured by residential real estate located in a community in which flood insurance is available.
c. A consumer loan secured by a lake house located in a community in which flood insurance is not available.
d. A loan for the purpose of making investments secured by commercial rental property located in a community in which flood insurance is available.
c. A consumer loan secured by a lake house located in a community in which flood insurance is not available.
Any loan secured by a building or mobile home located in a SFHA where flood insurance is available must have flood insurance as a condition of making the loan.
Which of the following is acceptable proof of the purchase of flood hazard insurance?
a. Copy of the declarations page of the insurance policy
b. A certificate of insurance
c. Flood insurance binder
d. Letter signed by the borrower agreeing to purchase the insurance
a. Copy of the declarations page of the insurance policy
Although FEMA guidelines have been rescinded, they are sill applicable and say that there are only two forms of proof of insurance. One is a copy of the declarations page of the policy. The other is the insurance application along with proof of payment. the NFIP does not recognize binders or certificates of insurance.
State National Bank is making a loan to the ACME Corporation to be secured by ACME’s manufacturing plant. The bank’s loan is for $250,000. The appraised value of the plant is $750,000. The maximum amount of flood insurance available for a commercial building is $500,000. What is the least amount of flood insurance that the bank must require under the Flood Regulations?
a. $250,000
b. $750,000
c. $500,000
d. None of the above
A. $250,000
What are the flood requirements for individual condominium unit loans?
The lesser of:
- The outstanding principal balance
- The maximum limit for the residential condo unit, or
- The insurable value allocated to that unit (replacement cost value of the building divided by the number of units in the building)
What is the penalty for violating the flood regulations?
$2000 per occurrence.
Rate rules: residential property that is not a primary residence can have rate increases of up to __% per year
18%
When must lenders offer the option to escrow flood insurance premiums & fees?
Any loans outstanding as of Jan 1, 2016 must escrow by June 15, 2016.
Is escrow required if the loan is in a subordinate position to a senior lien secured by the same property for which flood insurance is being provided?
No, this is an exemption from the mandatory escrow requirement.
Exceptions include
* small lenders (less than $1B assets);
* loans primarily for business, commercial or agricultural purposes;
* loans in a subordinate position to a lien on the same property that is adequately covered;
* loans secured by properties that are already covered by a blanket condo, co-op, HOA or similar group policy;
* HELOCs;
* nonperforming loans (90 days or more past due and remaining nonperforming until they are permanently modified, or the entire amount past due is collected or discharged); and
* loans with terms less than 12 months.
Are lenders required to review the portfolio periodically to identify uninsured or underinsured loans?
No, and they don’t have to track map changes either. However, if a bank discovers an uninsured or underinsured loan, it must notify the borrower and force place insurance, if necessary.
What must be monitored?
* Insurance policies (to make sure they’re current)
* Different types of flood policies
* NOT flood maps or loans already made
When should a notice that a property is located in an area having special flood hazards typically be delivered to the borrower?
a. Only upon the borrower’s request
b. A reasonable time in advance of the loan closing
c. At the loan closing
d. No later than 30 days after the loan closing
b. A reasonable time in advance of the loan closing
FEMA will charge a $__ surcharge for primary residences per year and a $__ surcharge for other types of properties.
$25 surcharge for primary residences
$250 surcharge for other types of properties
When may a bank force the placement of flood insurance on the borrower’s property?
a. Immediately on the expiration of the flood insurance
b. 10 days after notifying the borrower
c. 21 days after notifying the borrower
d. 45 days after notifying the borrower
d. 45 days after notifying the borrower
The bank must force the placement of flood insurance for the required amount of coverage, at the borrower’s expense, 45 days after notifying the borrower.
