There have been flood map changes that recently became effective in our lending area and we are now receiving updated LOL flood determinations that indicate some properties are no longer in a flood zone. Are we required to notify each borrower that their property is no longer in a flood zone and flood insurance is no longer required? We know some of these borrowers have already been made aware of the fact that their property is no longer in a flood zone (most likely from their insurance agent). Just wondering if there is any type of mandatory notification requirement for the bank in this situation or if this is just a good practice/courtesy to our borrower to send a written notice? Thanks.

I am not aware of any regulatory requirement to notify the borrower the property has been remapped outside the SFHA.

It is your option to continue requiring the insurance or allowing the borrower to cancel the insurance.

As Dan stated, you have no regulatory requirement to notify them.

My opinion: You were the one that told them they had to have insurance to get the loan. Why wouldn't you tell them that's no longer true. I think it's the right thing to do to. Otherwise, I could see a (legitimately) ticked off customer.

Just one caveat. If you choose to send the borrower a letter, I would be asking legal counsel assistance in drafting the letter. You want to be absolutely sure that the letter properly conveys that it is only the bank that is no longer going to require proof of flood insurance as a future condition of the loan, but in no way is the bank suggesting that the borrower drop or cancel their flood insurance. Floods do not normally stop at the magical line drawn on flood maps and they should be consulting their financial advisor and insurance professional for any specific recommendations on continuing to maintain flood insurance.

Even if you decide you want to continue to require flood coverage, informing your borrower would let him know that it's still required even if he learns from another source that the mapping's been updated. He may want to try to get the same coverage for less money now that his building isn't in the SDFHA.