Flood Insurance Flashcards

Question

What is a master condo policy called?

Answer 1

Residential Condominium Building Association Policy (RCBAP)

Answer 2

Both the common and individually owned building elements within the units, improvements in the units, and contents owned in common areas if contents is included in the policy.

Answer 3

Lessor of: - 100% RCV of building - Total number of units x $250,000

Answer 4

Lesser of: - Outstanding Principal - RCV of building/#units - $250,000

Answer 5

Either: - RCBAP that covers 100% of RCV of building - RCBAP that covers $250M x total number of building units - Borrower obtained a dwelling policy that covers the difference between the RCBAP/unit and mandatory flood insurance required

Answer 6

The RCBAP max coverage should be $10MM because that is the lessor of the RCV and the NFIP max ($12,5MM)

Answer 7

Building: $500M Contents: $500M Not eligible for coverage under a RCBAP.

Answer 8

Each must be covered by flood insurance if located in a flood zone. Either with one policy per building or a schedule listing each building. Amount required depends on the type of loan but is typically the lessor of: - NFIP max - Outstanding Principal - RCV

Answer 9

No, but it is prudent practice.

Answer 10

Escrow of premiums and fees for residential RE MIRE after 01/01/2016. Additionally, banks must make escrow available to loans secured by resi RE that have an outstanding balance as of 01/01/2016. The 2 exceptions are: Small lenders loan-type

Answer 11

Not required to escrow if: - total assets less than $1MM as of Dec 31 of either of prior 2 calendar years - and, as of July 6, 2012, the bank was not required by federal or state law to escrow or - the bank does not have a policy of uniformly and consistently escrowing the same.

Answer 12

For any MIRE on resi RE on or after July 1 of the first calendar year of changed status.

Answer 13

The escrow requirement does not apply to the following types of loans: - loans primarily for business, commercial, or agricultural purposes even if secured by residential RE. - Subordinate loans on a property that has sufficient flood insurance - Condos covered by sufficient RCBAPs - HELOCs - Nonperforming loans - Loans with terms less than a year.

Answer 14

As soon as reasonably possible.

Answer 15

Option to escrow notice must have been provided by June 30, 2016. A bank that no longer qualifies for the small lender exception must provide option to escrow notice by Sept 30 of the year status changes, to all loans with outstanding balance as of 01/01/2016

Answer 16

No a bank may choose to provide a separate notice or add it to any other disclosure provided to the borrower. (ex: periodic statement)

Answer 17

The Standard flood hazard determination form (SFHDF)

Answer 18

Printed, computerized, or electronic Must be retained for the period of time the bank owns the loan.

Answer 19

No elevation determinations can only be determined by FEMA, which can result in Letter of Map Revisions/Amendments.

Answer 20

Removes a property from a SFHA after property owners submit elevation materials and an application to FEMA, who then determines if the property is actually in the SFHA or if it is above the base flood elevation. Determination usually takes 4-6 weeks upon receiving an application.

Answer 21

No, the lender has the discretion to continue the require insurance if they think it is prudent.

Answer 22

Request submitted to FEMA to revise a SFHA map after physical changes are made to raise the land above the base flood elevation. (Ex: property is graded and filled to raise the level of the land). Request must be initiated and approved by the community since changes in land level may affect other property owners.

Answer 23

- if the determination in no more than 7 years old - if the previous determination was recorded on the SFHDF Exceptions: - If FEMA map revisions or updates show the property is not in a SFHA - If FEMA indicates map revisions/updates have been made after the date of the previous determination.

Answer 24

If at any time during the life of the loan, the bank determines that required flood insurance is deficient.

Answer 25

Notify the borrower that they need to obtain flood insurance within 45 days.

Answer 26

Purchase insurance on the borrowers behalf.

Answer 27

commence force placement procedures: Send 45 day notice force place if insurance is not purchased in 45 days.

Answer 28

The bank may charge the customer to cover the insurance beginning on the date coverage lapsed or was underinsured.

Answer 29

Terminate the force placed insurance within 30 days of receipt of confirmation of existing insurance. Refund the borrower all force placed premiums and fees paid by the borrower during the overlap period.

Answer 30

Lapsed: the amount required under NFIP- lesser of NFIP max, principal balance or RCV Underinsured: difference between the present amount of coverage and amount required under NFIP.

Answer 31

A reasonable fee can be charged: - for a MIRE event that triggers a flood determination - if there is a revision or updating of floodplain areas or risk zones by FEMA - the determination is because FEMA publishes a notice that affect the area where the loan is located - the determination results in the purchase of force placed insurance.

Answer 32

SFHDF | SFHA notice

Answer 33

- Warning that property is in a SFHA - description of flood purchase requirements - Statement, if applicable, that NFIP insurance is available and may also be available from private insurers. - Statement that flood insurance is available from private companies that issue policies on behalf of NFIP. - statement that flood insurance that provides the same level of coverage as an NFIP policy may also be available from a private insurance company that issues policies on behalf of the company. - Statement that borrower is encouraged to compare NFIP and private policies, and borrower should inquires about the availability, cost, and comparisons of flood insurance to an insurance agent. - Statement whether Federal Disaster relief assistance may be available in the event of flooding in a federally declared disaster. - Escrow notice (if required)

Answer 34

Within a reasonable time before completion of the transaction. This is typically considered 10 days prior to consummation.

Answer 35

As promptly as practicable after the bank provides notice to the borrower. But no later than when the lender transmits other loan data to the servicer (hazard or taxes)

Answer 36

Notice is required to be sent within 60 days of the date of transfer. That way FEMA can provide notice to the servicer 45 days before expiration of flood insurance.

Answer 37

- Copies of SFHDFs for the life of the loan | - Records of receipt of the notice of special flood hazards to the borrowers and servicers for life of the loan.

Answer 38

- Signed copy of notice - borrower initialed list of documents and disclosures provided to the borrower - electronic copy of receipt or other document signed by the borrower.

Answer 39

- Mandatory flood purchase requirements - escrow requirements - notice requirements - force placement requirements.

Answer 40

If there is a pattern or practice of any of the following violations: - Mandatory flood purchase requirements - escrow requirements - notice requirements - force placement requirements.

Answer 41

$2,000 per violation.

Answer 42

Within 4 years of the date of the violation

Answer 43

Yes. The regulation does apply, but lenders need not require borrowers to obtain flood insurance in an area not covered by NFIP. Thus, lenders must still notify the borrower if they are in a flood zone according to the guidelines, but does not have to require flood insurance. Exceptions: Lender may not make a government guaranteed loan (FHA, SBA, VA loans) secured by property in SFHA in a community without NFIP.

Answer 44

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.

Answer 45

No purchasing a loan is not a triggering event. Only MIRE events trigger. However, if the lender becomes aware at any point during the life of the loan that flood insurance is required they must comply with the regulation, force placing if needed.

Answer 46

Participations or syndications are not trigger events, only MIRE events trigger. However, the loan is still subject to the requirements. Sometimes participations delegate compliance responsibilities to one party in the deal, but each participating lender remains individually responsible from the agencies. Agency will insure the lender has performed due diligence to ensure both the lead lender and agent have taken necessary steps to ensure borrower obtains appropriate flood insurance. And ensure the lender in monitoring the loan.

Answer 47

It depends. If the loan otherwise meets the definition of a designated loan and if the lender increases the amount of the loan, or extends or renews the terms of the original loan, then the Regulation applies.

Answer 48

Yes, table funded loans as defined by RESPA are treated as though the party advancing the funds has originated the loan. The funding party is required to comply with the regulation by requiring the party processing and underwriting the loan to perform administrative requirements.

Answer 49

No requirements are limited to MIRE events. However, periodic monitoring is considered a sound risk management practice.

Answer 50

It depends on the secured collateral: - Residential buildings $250K - Non-Resi $500k Flood insurance coverage is limited to the overall value of the property securing the loan minus the value of the land. INSURABLE VALUE Lesser of the three: NFIP max, insurable value, or outstanding principal balance.

Answer 51

Resi: $35k | Non-Resi: $100k

Answer 52

No. Flood RCV also includes the repair or replacement cost of the foundation and supporting structures.

Answer 53

Yes, the lender must cover the value of the structure if it is located in a participating community SFHA

Answer 54

Overall value of property minus the land. Same as 100% Replacement cost value. I.E. the cost to replace property with the same kind of material and construction without deduction for depreciation. However, lenders should avoid creating a situation in which the insured pays for more coverage than the NFIP would pay in the event of a loss.

Answer 55

Single family dwelling including a condo is covered under a dwelling policy. Dwelling: upon loss, payment is settled at RCV if the dwelling is insured for at least 80% of the RCV or the NFIP max. Other residential properties are settled at actual cash value. RCBAPs: settled at RCV, unless building coverage is less than the lesser of the 80% RCV or the NFIP max. In that case it is subject to a co-insurance penalty.

Answer 56

No because there are circumstances when the insurable value is less than the RCV. i.e. dwelling policies 80% RCV

Answer 57

RCV less physical depreciation ex: other residential properties loss payout

Answer 58

- Cost based appraisal - construction cost calculation - Hazard insurable value with adjustment for foundation - or any other reasonable approach that can be supported.

Answer 59

- 1-4 family dwellings - apartments or other residential buildings with more than 4 units - Condos/cooperatives where 75% square footage is residential - long term stay hotels (more than 6 months) - rooming houses with more than 4 roomers - residential building with non-residential areas that do not exceed 25% of sqft or 50% for single family homes

Answer 60

- small businesses - churches - schools - farm activities (grain bins/silos) - pool houses - club houses - recreation centers - mercantile structures - agricultural or industrial structures - warehouses - short term hotels and motels - nursing homes - mixed use buildings with less than 75% residential square footage.

Answer 61

The minimum amount of insurance required by the Regulation for the equipment shed is $30,000.

Answer 62

Yes. the lender must determined the amount of insurance required for each building. Lesser of: - NFIP max - outstanding principal - insurable value of all buildings total The amount of total required flood insurance can be allocated among the secured building in varying amounts, but all buildings in an SFHA must have some coverage.

Answer 63

Amount of insurance required for the three buildings is $150,000. This amount of required flood insurance could be allocated among the three buildings in varying amounts, so long as each is covered by flood insurance.

Answer 64

No. The amount of coverage is the lesser of: - NFIP Max - Outstanding principal - insurable value

Answer 65

Yes. But the lender should avoid creating situations where the building is "over-insured" meaning more than what the NFIP would pay out in the event of a loss.

Answer 66

Yes, however this may not be a sound practice in every situation. The reasonableness of the deductible should be determined on a case by case basis. The lender may not allow a borrower to take a deductible equal to the insurable value of the building.

Answer 67

- state owned property covered under a policy of self-insurance satisfactory to the director of FEMA. - BOTH Principal is $5k or less and repayment term is 1 year or less.

Answer 68

No. A designated loan is secured by a building or mobile home that is located or to be located in an SFHA in which flood insurance is available under the act. A land secured loan is not a designated loan since it is not secured by a building or mobile home.

Answer 69

Yes. A lender must make a flood determination prior to origination to determine if the building to be constructed will be located in a SFHA. If so, the lender must property notify the borrower prior to loan origination and require flood insurance.

Answer 70

Yes. Buildings that are yet to be walled and roofed are eligible for coverage except when construction has been halted for more than 90 days or if the lowest floor is below the Base Flood Elevation. Building materials are not insurable unless they are within an enclosed building on or near the premises. The policy may be purchased in advance but, coverage does not start until the start of construction (first placement of permanent construction on a building site ex: foundation)

Answer 71

Under the Act, as implemented by the Regulation, a lender may not make, increase, extend, or renew any loan secured by a building or a mobile home, located or to be located in an SFHA in which flood insurance is available, unless the property is covered by adequate flood insurance for the term of the loan. One way for lenders to comply with the mandatory purchase requirement for a loan secured by a building in the course of construction that is located in an SFHA is to require borrowers to have a flood insurance policy in place at the time of loan origination. Alternatively, a lender may allow 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 the Base Flood Elevation, when the building is walled and roofed.6 However, the lender must require the borrower to have flood insurance in place before the lender disburses funds to pay for building construction (except as necessary to pour the slab or perform preliminary site work, such as laying utilities, clearing brush, or the purchase and/or delivery of building materials) on the property securing the loan. If the lender elects this approach and does not require flood insurance to be obtained at loan origination, then it must have adequate internal controls in place at origination to ensure that the borrower obtains flood insurance no later than when the foundation slab has been poured and/or an elevation certificate has been issued.

Answer 72

No. The NFIP will rely on an insurance agent’s representation on the application for flood insurance that the purchase of insurance has been properly deferred unless there is a loss during the first 30 days of the policy period. In that case, the NFIP will require documentation of the loan transaction, such as settlement papers, before adjusting the loss.

Answer 73

Yes. Lenders must require insurance on RE improvements with those improvements are part of the property securing the loan and are located in a flood zone. The lender can carve out buildings from the security of the loan. But lenders should consider the risks in this instance, such has zoning laws and challenges in the event of foreclosure.

Answer 74

A lender is required to make a determination as to whether the improved real property securing the loan is in an SFHA. If secured improved real estate is located in an SFHA, but not in a participating community, no flood insurance is required, although a lender can require the purchase of flood insurance (from a private insurer) as a matter of safety and soundness. Conversely, where secured improved real estate is located in a participating community but not in an SFHA, no insurance is required. A lender must provide appropriate notice and require the purchase of flood insurance for designated loans located in an SFHA in a participating community.

Answer 75

Yes. They apply to the purchase requirements under the reg.

Answer 76

A master policy for residential condos issued by FEMA. (i.e. more than 75% of the building is residential use) The RCBAP covers both the common and individually owned building elements within the units, improvements within the units, and contents owned in common (if contents coverage is purchased).

Answer 77

Lesser of: - 100% of the RCV, including foundation and supporting structures - Total number of units x $250k

Answer 78

Lesser of: - outstanding principal balance - NFIP max ($250K per unit) - Insurable value of building divided by number of units.

Answer 79

Notify the borrower of the reasons for the conflict. and if the borrower is underinsured, it should require the purchase of a dwelling policy for supplemental coverage.

Answer 80

$250,000. Borrower does not need to purchase additional insurance. RCBAP provides required coverage. • Outstanding principal balance of loan is $300,000 • Maximum amount of coverage available under the NFIP, which is the lesser of: o Maximum limit available for the residential condominium unit is $250,000; or o Insurable value of the unit based on 100 percent of the building’s replacement cost value ($15 million ÷ 50 = $300,000).

Answer 81

They must required the borrower to obtain a dwelling policy for the sufficient amount. Either for the full amount or for the amount needed to make up for the RCBAP shortfall.

Answer 82

The lender must require the individual unit owner/ borrower to purchase a flood insurance dwelling policy in the amount of at least $175,000, since there is no RCBAP, to satisfy the Regulation’s mandatory flood insurance requirement. (This is the lesser of the outstanding principal balance ($175,000), the maximum coverage available under the NFIP ($250,000), or the insurable value ($200,000).)

Answer 83

the lender should request that the individual unit owner/borrower ask the condominium association to obtain additional coverage that would be sufficient to meet the Regulation’s requirements If the condominium association does not obtain sufficient coverage, then the lender must require the individual unit owner/ borrower to purchase a dwelling policy in an amount sufficient (difference between RCBAP and required coverage)

Answer 84

The lender must require the individual unit owner/ borrower to purchase a flood insurance dwelling policy in the amount of $40,000 to satisfy the Regulation’s mandatory flood insurance requirement of $200,000. (This is the lesser of the outstanding principal balance ($300,000), the maximum coverage available under the NFIP ($250,000), or the insurable value ($200,000).) The RCBAP fulfills only $160,000 of the Regulation’s flood insurance requirement.

Answer 85

the individual unit owner’s dwelling policy may contain claim limitations that prevent the dwelling policy from covering the individual unit owner’s share of the co-insurance penalty, which is triggered when the amount of insurance under the RCBAP is less than 80 percent of the building’s replacement cost value at the time of loss. In addition, following a major flood loss, the insured unit owner may have to rely upon the condominium association’s and other unit owners’ financial ability to make the necessary repairs to common elements in the building, such as electricity, heating, plumbing, and elevators. It is incumbent on the lender to understand these limitations.

Answer 86

the lender must notify the individual unit owner/ borrower of the requirement to maintain flood insurance coverage sufficient to meet the Regulation’s mandatory requirements. The lender should encourage the individual unit owner /borrower to work with the condominium association to acquire a new RCBAP in an amount sufficient to meet the Regulation’s mandatory flood insurance requirement Failing that a dwelling policy is required. If a dwelling unit is not purchased in 45 days of the notification to the borrower, the lender must force place.

Answer 87

If RCBAP at time of loss is less than 80% RCV then the loss payment is subject to a co-insurance penalty. Which is determined by: - divide flood insurance carried by 80% of either RCV or NFIP max, whichever is less. - then multiply that number by the amount of loss (before applying the deductible) - Then subtract the deductible from that amount. The insurance will pay out the lesser of : The final number from above or the amount of insurance carried.

Answer 88

The policy will pay no more than $134,500. The remaining $15,500 is not covered due to the co-insurance penalty ($15,000) and application of the deductible ($500). Unit owners’ dwelling policies will not cover any assessment that may be imposed to cover the costs of repair that are not covered by the RCBAP. Step A: 180,000 ÷ 200,000 = .90 (90% of what should be carried to avoid co-insurance penalty) Step B: 150,000 x .90 = 135,000 Step C: 135,000 – 500 = 134,500

Answer 89

The policy will pay no more than $149,500 ($150,000 amount of loss minus the $500 deductible). This example also assumes a $150,000 outstanding principal loan balance. Step A: 200,000 ÷ 200,000 = 1.00 (100% of what should be carried to avoid co-insurance penalty) Step B: 150,000 x 1.00 = 150,000 Step C: 150,000 – 500 = 149,500 In this example there is no co-insurance penalty, because the actual amount of insurance carried meets the 80 percent requirement to avoid the co-insurance penalty.

Answer 90

- the dwelling policy will pay for the part of the loss that exceeds 80% of the RCV allocated to that unit - will not cover the association's deductible - will cover building elements after the RCBAP limits have been exhausted, but coverage combinations cannot exceed $250K per unit.

Answer 91

- does not cover reimbursement to the association for the co-insurance penalty - loss assessment only covers building damages in excess of the 80%. Thus damages must exceed 80% before the dwelling policy is available.

Answer 92

- covers assessments against unit owners for damages to common areas up to the dwelling policy limit. - if there are damage to building elements of the unit as well, dwelling policy covers those first but will not exceed the coverage limit under the policy.

Answer 93

Yes. A home equity loan is a designated loan, regardless of the lien priority, if the loan is secured by a building or a mobile home located in an SFHA in which flood insurance is available under the Act.

Answer 94

No. A determination is required before the loan is made or may be required if there is a request to increase the line. But draws on the line do not require a determination.

Answer 95

The lender must ensure adequate flood insurance is in place or require coverage be added. Lesser of: - combined total balance on first and second lien - NFIP Max - Insurable value Both lienholders should work together with the borrower to determine how much flood insurance is needed to cover the collateral.

Answer 96

lender may presume that the amount of insurance coverage relating to the senior lien in place at the time the junior lien was first established continues to be sufficient. (assuming it was adequate at the time of origination)

Answer 97

- obtain borrower consent in the loan agreement to obtain info on the balance and flood insurance amounts from the senior lien holder - pull a borrowers credit to establish how much flood insurance is required for increasing or renewing a junior lien.

Answer 98

Lender B must ensure that flood insurance in the amount of $150,000 is purchased and maintained. If Lender B were to require additional flood insurance only in an amount equal to the principal balance of the second mortgage ($50,000), its interest in the secured property would not be fully protected in the event of a flood loss because Lender A would have prior claim on $100,000 of the loss payment towards its principal balance of $100,000, while Lender B would receive only $25,000 of the loss payment toward its principal balance of $50,000.

Answer 99

Lender B must ensure that flood insurance in the amount of $150,000 is purchased and maintained. If Lender B were to require flood insurance only in an amount equal to the principal balance of the second mortgage ($50,000) through an NFIP policy, then its interest in the secured property would not be protected in the event of a flood loss because Lender A would have prior claim on the entire $50,000 loss payment towards its principal balance of $100,000.

Answer 100

Lender B must ensure that flood insurance in the amount of $90,000 (the insurable value) is purchased and maintained on the secured property to comply with the Act and Regulation. If Lender B were to require flood insurance only in an amount equal to the principal balance of the second mortgage ($10,000), its interest in the secured property would not be protected in the event of a flood loss because Lender A would have prior claim on the entire $70,000 loss payment towards the insurable value of $90,000.

Answer 101

It depends. If the same lender made the first mortgage a new determination is not needed if the old one is not more than 7 years old, no map changes, and it was recorded on a SFHDF. If the lenders are different you would need to get a new determination because this is a MIRE event. In either situation, the lender would need to ensure the property was adequately covered.

Answer 102

No because the collateral is not the type that would secured a designated loan as it does not include a building or mobile home. It is just inventory alone.

Answer 103

Yes. Flood insurance is required for the building located in the SFHA and any contents stored in that building.

Answer 104

The maximum amount of insurance that is available for both building and contents is $500,000 for each category. In this situation, federal flood insurance requirements could be satisfied by placing $150,000 worth of flood insurance coverage on the warehouse, thus insuring it to its insurable value, and $50,000 worth of contents flood insurance coverage on the inventory, thus providing total coverage in the amount of the outstanding principal ($200,000). balance of the loan.

Answer 105

No. If collateral securing the loan is stored in Building B, which does not secure the loan, then flood insurance is not required on those contents whether or not Building B is located in an SFHA.

Answer 106

Yes. The Act and Regulation look to the collateral securing the loan. If the lender takes a security interest in improved real estate located in an SFHA, then flood insurance is required.

Answer 107

No. A designated loan is a loan secured by a building or mobile home. In this example, the lender did not take a security interest in the building; therefore, the loan is not a designated loan.

Answer 108

Yes. The making of a loan on condition of a personal guarantee by a third party and further secured by improved real estate, which is located in an SFHA, owned by that third party is so closely tied to the making of the loan that it is considered a designated loan that requires flood insurance

Answer 109

If the lender sells the loan and servicing rights they must provide notice of the identity of the new servicer to FEMA then has no further obligations. If ownership is maintained but servicing is transferred, the lender must notify FEMA of the new servicer. The servicing contract should require the servicer to comply with the regulation including escrow, force placement, and flood determination fees. However, as they are unregulated, it is the lenders ultimate responsibility to ensure the loan servicer maintains compliance as the lender remains ultimately liable.

Answer 110

The purchase of the loan and servicing rights is not a MIRE event. However, if the lender becomes aware at any point during the life of the loan that flood insurance is required they must comply with the regulation including force placement. If the regulated lender just purchases the servicing rights, they are only obligated to follow the terms of its servicing contract with the owner of the loan. If the regulated lender sells or transfers the servicing rights, they must notify FEMA the identity of the new servicer, if that is included in the contract.

Answer 111

FEMA stated in a June 4, 1996, letter that the Director’s designee is the insurance company issuing the flood insurance policy. The borrower’s purchase of a policy (or the regulated lender’s force placement of a policy) will constitute notice to FEMA when the regulated lender is servicing that loan. In the event the servicing is subsequently transferred to a new servicer, the regulated lender must provide notice to the insurance company of the identity of the new servicer no later than 60 days after the effective date of such a change.

Answer 112

Yes. The delivery of a copy of the Notice of Transfer or any other form of notice is sufficient if the sender includes, on or with the notice, the following information that FEMA has indicated is needed by its designee: 24. Borrower’s full name; 25. Flood insurance policy number; 26. Property address (including city and state); 27. Name of lender or servicer making notification; 28. Name and address of new servicer; and 29. Name and telephone number of contact person at new servicer.

Answer 113

Yes. The Regulation specifically permits transmission by electronic means. A timely batch transmission of the notice would also be permissible, if it is acceptable to the Director’s designee.

Answer 114

No. After servicing rights are sold or transferred, subsequent notification obligations are the responsibility of the new servicer.

Answer 115

If an institution is acquired by or merges with another institution, the duty to provide notice for the loans being serviced by the acquired institution will fall to the successor institution in the event that notification is not provided by the acquired institution prior to the effective date of the acquisition or merger.

Answer 116

Multifamily: Yes if the building is a home or other residential building located in a SFHA with NFIP available. However, the lender is not required to escrow if it does not require escrow for any other charges like Hazard or taxes. Mixed use: Yes, if the building's primary use is residential.

Answer 117

No, if escrow accounts for other purposes are established at the request of the borrower, the lender is not required to escrow for flood.

Answer 118

It depends. interest reserve accounts, compensating balance accounts, and marketing accounts do not count as escrow accounts. But accounts for hazard and taxes would trigger the requirements.

Answer 119

If coverage is adequate escrow is not required. However if RCBAP is inadequate and the unit is also covered by a dwelling policy, premiums for the dwelling policy would need to be escrowed if the lender requires escrow for other purposes.

Answer 120

Yes. Assuming the statutory prerequisites for force placement are met, and subject to the servicing contract between the lender and the servicer, the Act clearly authorizes servicers to force place flood insurance on behalf of the lender, following the procedures set forth in the Regulation.

Answer 121

The Regulation provides that the lender or its servicer shall purchase insurance on the borrower’s behalf if the borrower fails to obtain flood insurance within 45 days after notification. However, where there is a brief delay in force placing required insurance, the Agencies will expect the lender to provide a reasonable explanation for the delay, for example, where a lender uses batch processing to purchase force-placed flood insurance policies.

Answer 122

It depends. A private insurance policy may be an adequate substitute for NFIP insurance if it meets the criteria set forth by FEMA in its Mandatory Purchase of Flood Insurance Guidelines. to the extent that a private policy differs from the NFIP Standard Flood Insurance Policy. The differences should be carefully examined before the policy is accepted as sufficient protection under the law.

Answer 123

A lender may rely on a private insurance policy that does not meet the criteria set forth by FEMA only in limited circumstances. For example, when a flood insurance policy has expired and the borrower has failed to renew coverage, private insurance policies that do not meet the criteria set forth by FEMA, such as private insurance policies providing portfolio-wide blanket coverage, may be useful protection for the lender for a gap in coverage in the period of time before a force placed policy takes effect. However, the lender must still force place adequate coverage in a timely manner, as required, and may not rely on a private insurance policy that does not meet the criteria set forth by FEMA on an ongoing basis.

Answer 124

No. Th SFHDF is used to determine if the building is in a flood zone. While the notification form is used to notify the borrower that the building is in a flood zone and to inform them of the requirements and availability of insurance.

Answer 125

Yes. This is not required but is permitted. Especially when the borrower wants to provide the SFHDF to the insurance company to avoid discrepancies. Also, the lender would need to make the SFHDF available to the borrower in the case of a special flood hazard determination review.

Answer 126

Yes. In the final rule adopting the SFHDF, FEMA stated: “If an electronic format is used, the format and exact layout of the Standard Flood Hazard Determination Form is not required, but the fields and elements listed on the form are required. Any electronic format used by lenders must contain all mandatory fields indicated on the form.” It should be noted, however, that the lender must be able to reproduce the form upon receiving a document request by its federal supervisory agency.

Answer 127

It depends. A lender can rely on a previous form when increasing, extending, renewing or purchasing a loan. Making a loan is not a permissible event that permits a lender to rely on a previous determination. Additionally, if the refinance is with the same lender, the previous SFHDF cannot be more than 7 years from the date of the transaction. If any map revisions, or updates have occurred to the secured property, or the refinance is with a new lender (making), then a new SFHDF is needed. If there are multiple loans secured by the same property. the same SFHDF can be used, as long as its no more than 7 years old, there have been no map changes, or significant building changes.

Answer 128

Yes, but only in same situations in which a lender can charge the flood determination fee. 30. When the determination is made in connection with the making, increasing, extending, or renewing of a loan that is initiated by the borrower; 31. When the determination is prompted by a revision or updating by FEMA of floodplain areas or flood-risk zones; 32. When the determination is prompted by FEMA’s publication of notices or compendia that affect the area in which the security property is located; or 33. When the determination results in force placement of insurance.

Answer 129

Concern is only warranted if the discrepancy is in a flood zone (A or V). if there is a discrepancy the lender should first note: - if this is from a "grandfather rule" all is well - if its from a mistake then recheck the SFHDF with third party that provided it, then request FEMA review the determination to determine accuracy. - if there is still an issue, inform the insurance company of their requirement to write a policy that covers flood zones and document communication in the file. (if this is done no violation will be cited if a discrepancy remains.)

Answer 130

This rule provides for the continued use of a rating on an insured property when the initial flood insurance policy was issued prior to changes in the hazard rating for the particular flood zone where the property is located. The Grandfather Rule allows policyholders who have maintained continuous coverage and/or who have built in compliance with the Flood Insurance Rate Map to continue to benefit from the prior, more favorable rating for particular pieces of improved property.

Answer 131

No. In a transaction with multiple borrowers, this need only be provided to one of the borrowers. And only if the property is in a SFHA.

Answer 132

When not possible to provide in advance of origination, the notice can be provided as soon as practicable after determination. Mobile homes that will not be located on a permanent foundation are excluded from the definition of a mobile home under the reg and notice requirements wouldn't apply. However, if the home is later put on a foundation flood insurance is required. At that time the lender would be responsible for ensuring the home is adequately insured or implement force place procedures.

Answer 133

Because the servicer of a loan is often not identified prior to the closing of a loan, the Regulation requires that notice be provided no later than the time the lender transmits other loan data, such as information concerning hazard insurance and taxes, to the servicer. Copy of the notice given to the borrower.

Answer 134

Yes. The Act requires the lender to notify the servicer of special flood hazards and the Regulation reflects this requirement. Neither contains an exception for affiliates.

Answer 135

For the time the lender owns the loan.

Answer 136

No. This only applies to the determination. A new notice is required even if a new determination is not.

Answer 137

A pattern or practice of violations of any of the following requirements of the Act and their implementing Regulation triggers a mandatory civil money penalty: Failure to... 34. Purchase of flood insurance where available(42 U.S.C. 4012a(b)); 35. Escrow of flood insurance premiums (42 U.S.C. 4012a(d)); 36. Force placement of flood insurance (42 U.S.C. 4012a(e)); 37. Notice of special flood hazards and the availability of Federal disaster relief assistance (42 U.S.C. 4104a(a)); and 38. Notice of servicer and any change of servicer (42 U.S.C. 4101a(b)).

Answer 138

The act does not define pattern or practice, but the FDIC policy is: Isolated, unrelated, or accidental occurrences will not constitute a pattern or practice. However, repeated, intentional, regular, usual, deliberate, or institutionalized practices will almost always constitute a pattern or practice. The totality of the circumstances must be considered when assessing whether a pattern or practice is present.

Answer 139

* Whether the conduct resulted from a common cause or source within the financial institution’s control; * Whether the conduct appears to be grounded in a written or unwritten policy or established practice; * Whether the non compliance occurred over an extended period of time; * The relationship of the instances of noncompliance to one another (for example, whether the instances of noncompliance occurred in the same area of a financial institution’s operations); * Whether the number of instances of noncompliance is significant relative to the total number of applicable transactions. (Depending on the circumstances, however, violations that involve only a small percentage of an institution’s total activity could constitute a pattern or practice); * Whether a financial institution was cited for violations of the Act and Regulation at prior examinations and the steps taken by the financial institution to correct the identified deficiencies; * Whether a financial institution’s internal and/or external audit process had not identified and addressed deficiencies in its flood insurance compliance; and * Whether the financial institution lacks generally effective flood insurance compliance policies and procedures and/or a training program for its employees.

Flood Insurance Flashcards

(166 cards)