Topic: Flood Insurance
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Under the Biggert-Waters changes, do we have to wait 45 days before we can force-place a flood insurance policy?
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We do not believe that anything in the Flood Disaster Protection Act of 1973 would prohibit a bank from force-placing flood insurance before the end of the forty-five day notification period, provided that you do not charge the customer for the insurance until the forty-five day period ends. See 42 USC 4012a(e). However, note that…
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We are processing the Biggert-Waters flood insurance changes, and we’re wondering how to handle charges for force-placed insurance. Can you provide a timeline of a force-placed flood insurance policy under the new law?
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As you observed, the Biggert-Waters Flood Insurance Reform Act of 2012 amended the Flood Disaster Protection Act of 1973 to allow the cost of force-placed flood insurance to include “premiums or fees incurred for coverage beginning on the date on which flood insurance coverage lapsed or did not provide a sufficient coverage amount.” 42 USC…
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Do we need to get a flood determination if the property securing the loan is a condominium development (but not the individual units themselves)?
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We believe that the flood regulations would still require a flood determination on this property. If the loan is secured by a “building or mobile home” on the property, it would be considered a “designated loan” that is subject to the flood insurance requirements. 12 CFR 339.3. The regulations define “building” as follows (12 CFR…
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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.…
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If we are taking additional collateral for a loan that would qualify it for flood insurance, but are not otherwise changing or extending the loan, do we need to purchase flood insurance?
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While the addition of a security interest in property located in a flood zone would make the loan a “designated loan” for purposes of the flood regulations, we do not believe that you will have to obtain flood insurance until you “make, increase, extend, or renew” the loan. 12 CFR 208.25(b)(4)
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If a loan is secured by a land trust, and not directly secured by any real property, would the flood regulations apply to that loan?
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An assignment of beneficial interest (ABI) in a land trust might not be considered a designated loan. Under the Illinois Land Trust Recordation and Transfer Tax Act and Land Trust Beneficial Interest Disclosure Act, the beneficiary’s interest in a land trust is defined as “personal property only.” 765 ILCS 405/1
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Are we required to monitor flood map changes after a loan closes in case the property securing the loan is added to a flood zone?
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There is no law or regulation that requires a bank to monitor mortgaged properties for inclusion in revised flood maps (though agreements with a GSE (e.g., Fannie Mae or Freddie Mac) or other investors almost always require such monitoring). Supplementary Information, Loans in Areas Having Special Flood Hazards, 61 Fed. Reg. 45684, 45693. However, if…
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May a customer choose not to escrow flood insurance if the insurance is not required?
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Voluntary escrow accounts requested by the borrower do not trigger the requirement that the lender escrow flood insurance premiums. Interagency Questions and Answers Regarding Flood Insurance, 62 Fed. Reg. 39523, 39527. The flood regulations require the escrow of flood insurance premiums only if the lender “requires the escrow of taxes, insurance premiums, fees, or any…