§ 55.5 Flood insurance. ( a ) ( 1 ) As required by section 102(a) of the Flood Disaster Protection Act of 1973, as amended (42 U.S.C. 4012a), when HUD financial assistance (including mortgage insurance) is proposed for acquisition or construction purposes in any special flood hazard area (as designated by the Federal Emergency Management Agency (FEMA) on an effective Flood Insurance Rate Map (FIRM) or Flood Insurance Study (FIS)), structures for which HUD financial assistance is provided must be covered by flood insurance in an amount at least equal to the project cost less estimated land cost, the outstanding principal balance of any HUD-assisted or HUD-insured loan, or the maximum limit of coverage available under the National Flood Insurance Program, whichever is least. Under section 202(a) of the Flood Disaster Protection Act of 1973, 42 U.S.C. 4106(a), such proposed assistance in any special flood hazard area shall not be approved in communities identified by FEMA as eligible for flood insurance but which are not participating in the National Flood Insurance Program. This prohibition only applies to proposed HUD financial assistance in a FEMA-designated special flood hazard area one year after the community has been formally notified by FEMA of the designation of the affected area. This requirement is not applicable to HUD financial assistance in the form of formula grants to States, including financial assistance under the State-administered CDBG Program (24 CFR part 570, subpart I), Emergency Solutions Grant amounts allocated to States (24 CFR part 576), and HOME funds provided to a State under Title II of the Cranston-Gonzalez National Affordable Housing Act (42 U.S.C. 12701-12839). HUD strongly encourages that flood insurance be obtained and maintained for all HUD-assisted structures in the FFRMS floodplain, sites that have previously flooded, or sites in close proximity to a floodplain.
( 2 ) Under section 582 of the National Flood Insurance Reform Act of 1994 (42 U.S.C. 5154a), HUD disaster assistance that is made available in a special flood hazard area may not be used to make a payment (including any loan assistance payment) to a person for repair, replacement, or restoration of damage to any personal, residential, or commercial property if: ( i ) The person had previously received Federal flood disaster assistance conditioned on obtaining and maintaining flood insurance; and
( ii ) The person failed to obtain and maintain the flood insurance.
( b ) HUD or the responsible entity may impose flood insurance requirements that exceed the minimums established by the Flood Disaster Protection Act of 1973 or by Tribal, State, or local requirements when needed to minimize financial risk from flood hazards. HUD and responsible entities have discretion to require that flood insurance be maintained for structures outside of the FEMA-mapped floodplain but within the FFRMS floodplain and/or that structures be insured up to the full replacement cost of the structure when needed to minimize financial risk from flood hazards. Nothing in this part limits additional flood insurance requirements that may be imposed by a mortgagee participating in a HUD assistance or mortgage insurance or guarantee program.
[89 FR 30905, Apr. 23, 2024]