Flood Insurance

Question: An institution that consistently violates these requirements is subject to severe __________.

fines

When your financial institution extends a loan secured by property in an SFHA, it must mail or deliver a written __________ to the borrower and servicer.

notice

Your financial institution may charge a __________ fee for determining whether the property lies in an SFHA.

reasonable

The amount of flood insurance required is the lesser of the __________ cost value of the improved property, mobile home, and/or personal property securing the loan.

replacement

The federal flood insurance rules require flood insurance coverage for any loan secured by real estate located in an SFHA within participating communities; this includes __________ mortgages, home equity loans, and lines of credit.

second

If a financial institution is found to have a pattern or practice of violating the flood insurance requirements, it can be assessed civil penalties of up to $_____ per violation, not to exceed a yearly maximum amount as determined by a formula using the Consumer Price Index.

$2,187

What would be the minimum amount of flood insurance required for a loan secured by a one- to four-family residential property in an SFHA with a principal balance of $225,000 and a replacement cost value of improved property of $200,000?

$200,000-The amount of insurance required is the lesser of the principal value of the loan, the replacement cost value of the improved property securing the loan, or the maximum available under NFIP ($250,000 for residential loans).

For one- to four-family residential property structures, the maximum amount of coverage is:

$250,000

Select all the true statements regarding determination:

--A financial institution can require flood insurance even if the federal rules do not mandate it --Your financial institution must retain a copy of the completed SFHDF for the period of time the financial institution owns the loan

Select all that apply. A statutory review must include:

--A formal request for a determination, signed by at least one borrower and the lender --A complete SFHDF --A copy of the FIRM panel showing the location of the property, title block, map date, scale bar, and north arrow --A copy of the notice to the borrower --The technical data used by the lender or third party that made the determination

Select all that apply. Flood insurance is required when:

--A loan renewal on a mobile home that is affixed to a permanent foundation located in an SFHA --A home equity loan for a storage shed installation on a concrete pad located in an SFHA --A mortgage on a beach house located in an SFHA --A loan for a travel trailer without wheels secured to a permanent foundation located in an SFHA

Flood insurance is required for the term of the loan on buildings or mobile homes when:

--Your financial institution makes, increases, extends, or renews any loan secured by improved real estate or a mobile home that is affixed to a permanent foundation, and the property securing the loan is located in, or will be located in, a Special Flood Hazard Area as identified by FEMA --The community participates in the NFIP ---The property securing the loan is (or will be) located in a Special Flood Hazard Area (SFHA), as identified by FEMA

Select from the list below the items that are exempt from flood insurance coverage.

-property securing any loan with an original principal balance of $5,000 or less and a repayment term of one year or less --Any detached structure that is part of any residential property --Mobile homes not affixed to a foundation --Boathouse

Makes federally-subsidized flood insurance available

1968 Act

Requires flood insurance for loans secured by real estate in SFHAs in participating communities

1973 Act

Requires mandatory forced placement of flood insurance

1994 Act

If the borrower fails to obtain insurance within __________ days of the notification, a financial institution must purchase insurance on behalf of the borrower. (Hint: number; use digits!)

45

If the borrower fails to purchase additional coverage within __ days of the notification, your financial institution must purchase flood insurance on the borrower's behalf.

45- The borrower has 45 days to purchase insurance after notification.

The key provisions for private flood insurance include all of the following EXCEPT:

Compliance aid for discretionary acceptance

A detached structure that is joined by a structural connection to a part of a residential property is considered exempt from the flood insurance requirements.

F

A home equity loan is not considered eligible for flood insurance.

F

A separate flood insurance policy must be in place for each mortgage on a property.

F

As long as there is at least some flood insurance on the collateral securing a loan, a financial institution may not perform a forced placement.

F

Fannie Mae loans are exempt from flood insurance requirements.

F

Flood insurance requirements apply to consumer loans only.

F

If the property securing a loan lies in an SFHA, it is the borrower's responsibility to notify the institution of that fact.

F

If your institution receives a Letter of Map Amendment or Letter of Map Revision from the Flood Insurance Administration, you cannot require flood insurance on the property.

F

It is the customer's responsibility to ensure that flood insurance remains in place for the term of the loan, and the lender is not required to monitor this.

F

The intended purpose of the loan, as opposed to the collateral, is the critical factor in the applicability of the flood insurance rules.

F

Under Truth-in-Lending Act requirements, the cost for the initial flood determination is included as part of the finance charges.

F -Under Truth-in-Lending Act requirements, the cost for the initial flood determination can be excluded from the finance charges.

When increasing, renewing, extending, or purchasing a loan, a lender can never rely on a previous determination.

F-A lender can rely on a previous determination if it is less than seven years old and was completed on a standard determination form; and no new or revised FIRMs or FHBMs have been issued since the determination.

All financial institutions are required to comply with the escrow requirements.

F-A small lender exception allows certain financial institutions to be exempt from the escrow requirements.

__________ produces the Flood Hazard Boundary Maps and the Flood Insurance Rate Maps to aid financial institutions in the determination process. (Hint - use the acronym)

FEMA

Flood insurance requirements apply to:

First mortgages Second mortgages Home equity loans ^^^^All of the above

A flood map produced by FEMA that shows a detailed analysis of the area's elevation and flood risk is called a:

Flood Insurance Rate Map

The requirement to escrow all premiums and fees for flood insurance applies to:

Home equity lines of credit (HELOCs) Loans with a business, commercial, or agricultural purpose Construction or temporary financing loans with a term of less than 12 months ***None of the above

The flood insurance requirements serve to ____ consumers by alerting them if their real estate is located in a flood-prone area and to _____ them by requiring flood insurance to be in place before a mortgage can be obtained.

Inform / protect

The purpose of the flood insurance requirements is to:

Inform and protect

For the Insurance program to require placement, the community must participate in the __________. (Hint - use the acronym)

NFIP

A Special Flood Hazard Area (SFHA) is any area that the director of FEMA determines has at least a ______ percent chance of flooding in a given year.

One % percent

NFIP insurance is available for:

Residential buildings Commercial buildings Agricultural buildings **All of the above

A financial institution is allowed to rely on Letter of Map Amendments or Letter of Map Revisions when deciding not to require flood insurance.

T

An institution's failure to use the SFHDF to determine if a property lies in an SFHA is a potential violation of the flood insurance requirements.

T

Because only one flood insurance policy can be issued per structure, it should be issued in an amount sufficient to cover both the first mortgage and the second mortgage, if there is one.

T

Institutions may charge a fee for life-of-loan monitoring.

T

Financial institutions are required to accept private flood insurance that meets both:

The definition of private flood insurance and the mandatory purchase requirement

How is flood insurance provided for second mortgages and home equity loans?

The existing policy must be sufficient to cover the secondary lien, with an appropriate endorsement

Flood insurance is required for:

The term of the loan

Which are exempt from flood insurance requirements?

Travel trailers

An SFHDF is used to determine:

Whether the property lies in an SFHA

If a lender and a property owner dispute a flood determination, they may jointly submit a review request to the FEMA __________.

director

When your financial institution accepts an application for a loan secured by improved real estate, it must determine whether any __________ on the property is located in an SFHA.

structure

Flood insurance is required for the __________of the loan on buildings or mobile homes that meet the conditions.

term