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Property Not In A Mandatory Purchase Flood Zone

Answered by: 
Dan Persfull

Question: 
What approach do other lenders take when a property is not in a mandatory purchase flood zone, but "maps-in" during the origination of the loan? In some institutions, we've had a process to verify the flood zone prior to close, but others have allowed loans to close and immediately put the loan into the 45-day flood letter cycle?
Answer: 

If you are aware the property has been mapped into a SFHA before the loan closes then you must require flood insurance to be in place before the loan closes. I'm not aware of any exception to that requirement regardless when you learned the property was located in a SFHA prior to the loan closing.

In my opinion knowingly closing a loan in a SFHA without flood insurance is a blatant and willful violation of the regulation.

First published on 10/09/2016

Filed under: 
Lending
Filed under lending as: 
Flood
Forced Placed

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