We have a 1st lien HELOC that went INTO a SFHA. The outstanding principal balance is zero balance. What is the amount of flood insurance coverage required on a line of credit secured by a residential improved real estate in this scenario?

Amount of Flood Insurance Required
The minimum amount of flood insurance required must be at least equal to the lesser of the outstanding principal balance of the loan, the maximum amount available under the NFIP for the type of structure, or the insurable value of the property. Flood insurance coverage under the NFIP is limited to the building or mobile home and any personal property that secures the loan and not the land itself.

OTHER SECURITY INTERESTS 3. What is the amount of flood insurance coverage required on a line of credit secured by a residential improved real estate?
A lender may take the following alternative approaches:
· For administrative convenience in complying with the flood insurance requirements, upon origination, a lender may require the purchase of flood insurance for the total amount of all loans or the maximum amount of flood insurance coverage available, whichever is less; or
· A lender may actively review its records throughout the year to determine whether the appropriate amount of flood insurance coverage is maintained, considering the draws made against the line or repayments made to the account. In those instances in which there is no policy on the collateral at time of origination, the borrower must, at a minimum, obtain a policy as a requirement for drawing on the line. Lenders that choose to actively review the line should inform the borrower that this option may have more risks, such as inadequate flood insurance coverage during the 30-day waiting period for an NFIP flood policy to become effective. Lenders should be prepared to initiate forceplacement procedures if at any time the lender determines a lack of adequate flood insurance coverage for a designated line of credit, as required under the Regulation.

Thanks, so do i just wait until the borrower draw on the line of credit to require flood insurance / force placement?

Not really sure why you would want to do that. This loan falls into this category:

"In those instances in which there is no policy on the collateral at time of origination, the borrower must, at a minimum, obtain a policy as a requirement for drawing on the line."

Which means when the borrow needs money, they are going to have to get a flood insurance policy first and if it is a NFIP policy, there is a 30 day wait for a policy to be effective if not obtained before loan closing.

Bite the bullet and get proper coverage now to cover the line and don't mess around with it.