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19 May
2022

FLOOD FAQS UPDATED!

FLOOD FAQS UPDATED!

After years of flood insurance regulatory changes, the agencies finally released an updated Flood FAQ that consolidates existing FAQs (from 2009) with those proposed in July 2020 and March 2021 into one set of questions as of May 11, 2022.  One of the key advantages of the new FAQ is that it is sorted by topic – you no longer need to read through all the questions to find your answer – and questions have been renumbered. The new FAQ contains 144 questions including 24 dedicated to Private Flood Insurance.

Here’s a sampling of questions:

  • Does an automatic extension of a credit facility, that was agreed upon by the borrower and the lender at loan origination and memorialized in the loan agreement, constitute a triggering event (i.e., making, increasing, extending, or renewing) that would trigger the Federal flood insurance requirements?
  • May a lender rely on an insurance policy providing portfolio-wide coverage to meet the flood insurance purchase requirement or the force placement requirement under the Regulation?
  • If a lender only receives a declarations page without receiving a copy of the policy, and the declarations page includes the compliance aid statement, may the lender accept the policy?
  • Does a lender need to reconcile a discrepancy between the flood zone designation on the flood determination form and the flood zone associated with a flood insurance policy? (This response has changed.)
  • Can a lender accept a blanket flood insurance policy or blanket multi-peril policy covering multiple buildings that includes a per-occurrence deductible, regardless of 88 12 CFR 22.3(a) (OCC); 12 CFR 208.25(c)(1) (Board); 12 CFR 339.3(a) (FDIC); 12 CFR 614.4930(a) (FCA); and 12 CFR 760.3(a) (NCUA). 205 whether any single building covered by the policy has an insurable value lower than the amount of the deductible?
  • If a lender allows a borrower to defer the purchase of flood insurance until either a foundation slab has been poured and/or an Elevation Certificate has been issued, or if the building to be constructed will have its lowest floor below Base Flood Elevation when the building is walled and roofed, when must the lender begin escrowing flood insurance premiums and fees?
  • What action must a lender take if the RCBAP coverage is insufficient to meet the Regulation’s mandatory purchase requirements for a loan secured by an individual residential condominium unit?
  • Does capitalizing the flood insurance premium into the outstanding principal balance constitute a triggering event – an “increase” that would trigger the applicability of flood insurance regulatory requirements?
  • Which violations of the Act can result in a mandatory civil money penalty?

For answers to these questions and more, see the latest Flood Insurance FAQs. 

For additional information contact the author at edehmey@fosaudit.com.