IBA Compliance Connection

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What should we do if a loan is in a flood zone, but the borrower has been unable to secure private flood insurance?

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Below are some suggestions for the loan for which the borrower is having difficulty obtaining flood insurance:

Because several private flood insurers have rejected the borrower’s applications for flood insurance, the bank may want to suggest that the borrower apply through the National Flood Insurance Program (NFIP). The application for NFIP insurance is available here.

The borrower may also request FEMA to perform a Letter of Determination Review (LODR) (LODR InstructionsLODR Form), as discussed in this FEMA Bulletin W-08021 (April 16, 2008). The FEMA bulletin also states that you may contact a FEMA Mapping Specialist directly at (877) 336-2627.

Note that if the borrower does not obtain flood insurance within a reasonable period, eventually the bank will have to force-place the flood insurance. 12 CFR 339.7. However, if flood insurance is not available under the Act (for example, because the property is not located in a participating community), the flood insurance requirement may not apply. 12 CFR 339.2.