Flood Disaster Protection Act

Question 1

Coverage of Flood Disaster Protection Act

Answer 1

Any loan secured by improved real estate or an insurable mobile home

• collateral-dependent, not purpose driven

Question 2

What is improved real estate? - Flood

Answer 2

1) A building (most any type) with 50% value above the ground
2) At least two load bearing walls and a roof
3) Mobile Home Insurability Standards
- has to be tied down
- has to be connected to utilities
- has to be inhabitable and secured to a foundation

Question 3

Standard Flood Hazard Determination Form (SFHDF) - Flood

Answer 3

1) Evidences the fact the determination was performed
2) Must be in file before the loan closes
- $2,000 fine if pulled after closing
3) Doesn’t have to be signed or given to borrower
4) Must be retained for as long as lender owns the loan

Question 4

Notice of special flood hazards - Flood

Answer 4

1) Provided when the borrower must obtain insurance (property is in a flood hazard zone)
2) Must contain escrow language
3) Must be signed by the borrower
4) Must be provided a reasonable time before closing
- “reasonable time” is 10 days

Question 5

Flood Determinations

Answer 5

1) Determination must be performed for triggering events - MIRE (Make, Increase, Renew, Extend)
2) Can rely on a previous determination done on the same property
- Previous one is not more than 7 years old
- Previous one was recorded on the standard form
- Flood zone has not changed since the original one was performed
3) Same lender/same property rule
- original determination must have been performed for your bank

Question 6

What can borrower do if they disagree with the determination? - Flood

Answer 6

1) Get FEMA to do a final determination
2) Maps always rule - FEMA must change the zone
- LOMA or LOMR on the FIRM

Question 7

Flood Zone Discrepancies

Answer 7

Banks determination is in high risk zone (A or V), insurance company says in low or moderate risk zone (X), it must be reconciled
- A vs. A1 is not a discrepancy since it is in same risk zone

Question 8

Flood Insurance Requirements

Answer 8

Can always require more, but the lesser of the three:

1) 100% of insurable value (replacement cost value of structure)
- disregard land value
- how to determine insurable value?
2) The amount of the loan (all liens)
3) $250,000 per 1-4 family residential structure, $500,000 per commercial structure or 5+ family residential structure
- structure limit, not loan

Question 9

Flood Insurance Monitoring Requirements

Answer 9

Monitor insurance policies to make sure they’re current (different types of flood policies)

• don’t need to monitor flood maps or loans already made
• if you get life of loan and find out that a map changed, must require borrower to get insurance because you have knowledge

Question 10

Flood insurance coverage - content

Answer 10

Must insure contents only if the building they are in is also taken as collateral and taking the contents as collateral

Question 11

Force Placed Insurance - Flood

Answer 11

1) Must force place a policy if borrower refuses
- have to cancel if borrower proves coverage
2) Can force place 45 days from the lapse in coverage
3) Send warning letters

Question 12

Escrow Requirements - FDPA

Answer 12

1) loan is secured by residential improved real estate (exceptions)
2) lender requires escrow for anything else, must also escrow flood premiums
3) don’t have to escrow if under $1 billion in assets