We will be taking an assignment of a loan that is in a flood zone. The principal balance is $20,000.

My question is can we take this assignment without having flood insurance in place? The regulations talks to “make, increase, extend, or renew.” This would not technically fall into any of those buckets. This is a special situation that I won’t go into details right now. My plan would be to force place after it is on our books. Would this be an acceptable course of action?

Assignment of the note or an assignment of the note and the security interest?

Note and security interest. We are partnering with Habitat for Humanity.

If you are taking the security interest, the loan will be covered.

42. If a borrower offers a note on a single-family dwelling as collateral for a loan but the lender does not take a security interest in the dwelling itself, is this a designated loan that requires flood insurance?

Answer: 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.

Thank you Randy.

We have recently come across a loan to Habitat that is secured by an assignment of note AND and an assignment of DOT. Based on this post, we will need to track flood insurance on this property.

For those BOL friends partnering with Habitat, do you typically take an assignment of DOT? I'm wondering if it was an over conservative move by the lender, in case the owner stops making payments to Habitat. Maybe I'm questioning the loan structure since I don't want to track flood.

Bringing this ongoing saga up again.....Credit Admin refuses to release the Assignment of DOT on properties in a flood zone for this Habitat loan. Therefore, we believe flood insurance needs to be tracked. However, how would you force place on property that you do not have a security interest? Do we get confirmation that Habitat is tracking flood insurance and remove this loan from our system?

You have a loan that is secured by an assignment of both the note and DOT/mortgage - correct? In that case, your loan is secured by property in a SFHA. Habitat is going to have to give you proof of coverage or your loan is most likely going to be in default. This would be different than if you outright purchased the loan, which is not a MIRE event.

Yes, we have an assignment of both. It just makes me really nervous to put the tracking responsibility on Habitat, but it feels like that's all we can do.