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Flood Insurance - Questions and Answers
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Flood Insurance - Questions and Answers
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Flood Insurance - Questions and Answers Does the Regulation apply to a loan where the building or mobile home securing such loan is located in a community that does not participate in the NFIP? CORRECT ANSWER Yes. However, a lender does not require borrowers to obtain flood insurance for a building or mobile home located in a community that does not participate in the NFIP, even if the building or mobile home securing the loan is located in a SFHA.What is a lender's responsibility if a particular building or mobile home that secures the loan, due to a map change, is no longer located within an SFHA? CORRECT ANSWER The lender is no longer obligated to require mandatory flood insurance; however, the borrower can elect to convert the existing NFIP policy to a Preferred Risk Policy.
Does a lender's purchase of a loan, secured by a building or mobile home located in an SFHA in which flood insurance is available under the Act, from another lender trigger any requirements under the Regulation. CORRECT ANSWER No.
How do the Agencies enforce the mandatory purchase requirements under the Act and Regulation when a lender participates in a loan syndication or participation? CORRECT ANSWER As with purchased loans, the acquisition by a lender of an interest in a loan either by participation or syndication after that loan has been made does not trigger the requirements of Act or Regulation, such as making a new
flood determination or requiring a borrower to purchase flood insurance.
Does the Regulation apply to loans that are being restructures or modified? CORRECT ANSWER It depends. If the loan meets the definition of a designated loans and if the lender increases the amount of the loan, or extends or renews the terms of the original loans, then the Regulation applies.
Are table funded loans treated as new loan originations? CORRECT ANSWER Yes. Table funding, as defined under RESPA, is a settlement at which a loan is funded by a contemporaneous advance of loan funds and the assignment of the loan to the person advancing the funds. Is a lender required to perform a review of its, or of its servicer's existing loan portfolio for compliance with the flood insurance requirements under the Act and Regulation? CORRECT ANSWER No.
What is meant by the "maximum limit" of coverage available for the particular type of property under the Act? CORRECT ANSWER It depends on the value of the secured collateral.
What are the maximum caps under NFIP? CORRECT ANSWER Single family and 2-4 family dwellings: $250k
Non-residential structures: $500k
What are the max caps for participating communities under the emergency program phase CORRECT ANSWER Single & 2-4 family dwellings: $35k
Non-residential structures: $100k
Does the NFIP insure land? CORRECT ANSWER No.
What is the insurable value? CORRECT ANSWER The overall value of a property
minus the land on which the property is located.
What are examples of residential buildings? CORRECT ANSWER 1-4 family dwellings
Apartment or other residential buildings containing more than four dwelling units
Condominiums and cooperatives where at least 75% of the square footage is residential
Hotels or motels where the normal occupancy of a guest is 6 months or more
Rooming houses that have more than 4 roomers
What are examples of nonresidential buildings? CORRECT ANSWER NR Buildings are those that are used for small business, churches, schools, farm activities (including grain bins and silos), pool houses, clubhouses, recreation, mercantile structures, agricultural and industrial structures, warehouses, hotels and motels with normal room rentals for less than 6 months' duration, nursing homes, and mixed-use buildings with less than 75 % residential square footage.
How much insurance is required on a building located in an SFHA in a participating community? CORRECT ANSWER The lesser of:
The outstanding principal of the loan(s)
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