Our commercial officer is taking an assignment of note and mortgage from a lender whose borrower has collateral in a flood zone. The lender did not conduct a flood determination however, to be safe and sound our commercial officer ordered a flood determination and part of the borrower's improvements are located within a SFHA (Special Flood Hazard Area).

Our commercial officer contacted me to inquire what steps to follow next, since he is only taking the assignment of note and mortgage from the lender and not from the borrower. I am responding by stating that the NFIRA (National Flood Insurance Reform Act) is not a requirement in this case, but for safety and soundness purposes he would want to require a copy of the flood insurance for the collateral or, require the lender to put a clause in the provision which protects our bank.

Would I be correct in my response? *Also, would page 19-20 of the Mandatory Flood Guidelines apply even if we were only taking an assignment of note directly from the borrower?


*The requirement to obtain flood insurance also applies regardless of the type of security interest taken (e.g., a mortgage indenture, judgment note, cognovit note, or any other type of security or trust agreement).

You may want to repost this in the lending forum.

I sure will. thanks!