Flood Insurance Quiz

by Mary Beth Guard, BOL Guru

As an attorney in the Dallas Regional Office of the FDIC, Lynn Hubble has seen way too many flood compliance violations. She's made it her mission to try to reduce the number of violations by devoting some of her time to educating bankers about the requirements.

One of the educational tools Lynn developed (and gave us permission to reprint) is a ten question quiz. Use it to test the knowledge of all your lending personnel.

1. Is the SFHDF mandatory for all real estate-related loans?
2. If the SFHDF form shows the property is not in a flood zone but the map indicates it is in a flood zone, which controls?
3. Can a lender waive flood insurance on a piece of property?
4. What happens if a lender disagrees with FEMA about a property?
5. When is a loan considered "made" for flood insurance purposes?
6. What evidence of coverage does a bank need to have at closing?
7. How long does proof of coverage have to be maintained?
8. What rules apply to second mortgage loans?
9. Do the same rules apply for business and construction loans?
10. Do the new Consumer Protection regulations that became effective october 1, 2001 apply to flood insurance?

Answers:

1. No, 44 CFR Section 65.16 only requires the form to be used on loans that are secured by improved real property or a mobile home.
2. The map.
3. No.
4. The property owner must appeal to FEMA for a Letter of Map Amendment (LOMA) or a Letter of Map Revision (LOMR).
5. At the time of closing and execution of the loan documents.
6. A copy of the flood insurance application indicating premium has been paid, or a copy of the mortgagor's check issued to pay the premium, or an insurance agent's certification of purchase of flood certification.
7. For the term of the loan.
8. The same rules apply; the second mortgage lender must protect its interest in the property.
9. Yes.
10. Yes, disclosure and anti-tying provisions will apply.

The original version appeared in the September 2002 edition of the Oklahoma Bankers Association Compliance Informer.

First published on BankersOnline.com 1/27/03