National Flood Insurance Program

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4 Know the amount of flood insurance coverage to require.

The required coverage is the lesser of the following:

1. The maximum amount of NFIP flood

insurance coverage available,

2. The outstanding principal balance of the

loan, or

3. The value of the building only. (Land and

land values are not covered under theNFIP.)

5 Notify borrowers in writing of the requirement to buy flood

insurance for new and existingloans.

New Loans: If you determine that a home orbusiness is in an SFHA before loan closing, youare required to notify the borrower within areasonable time (defined by Federal regulationas at least 10 days) prior to the loan closing.Existing Loans: If you determine that an existing loan for a home or business is in a SpecialFlood Hazard Area, you are also required tonotify the borrower within a reasonable time.The law provides for force placement of floodinsurance 45 days after the borrower is notifiedof deficient flood insurance coverage.TheNational Flood Insurance Program’s MortgagePortfolio Protection Program (MPPP) helps youforce place flood insurance when necessary.

6 Escrow flood insurance premiums.

The law requires you to escrow flood insurancepremiums for homes in SFHAs when taxes,other forms of insurance, or any other payments are escrowed.To help maintain floodcoverage for you and your borrower, considerescrowing flood insurance premiums for allloans, including loans on non-residentialimproved real estate.

7 There is no waiting period for flood insurance to go into effect

when it is purchased inconnection with making,increasing, renewing, orextending a loan.

In most other instances, there is a 30-day waiting period before flood insurance goes intoeffect. For more information about the waitingperiod and its exceptions, see Policy Issuance5-98 on the FEMA web site athttp://www.fema.gov/nfip/pi598.shtm.

8 Notify the insurance company or agent when the lender or 

servicer of a loan changes.

Notification of a change of lender or servicermust be made to the insurance company oragent who wrote the flood insurance policywithin 60 days after the effective date of thechange.

9 For more information about the mandatory purchase of flood

insurance requirements, andother related topics, read theMandatory Purchase of FloodInsurance Guidelines.

For a copy, call 1-800-480-2520 and requestdocument F-083, or access the book on theFEMA web site athttp://www.fema.gov/nfip/mpurfi.shtm.

10 Flood insurance and the mandatory purchase laws help

protect your investments as wellas your borrowers’ againstuninsured flood losses.

Floods happen all over the country. Make sureyou and your borrowers are protected from uninsured flood losses for their homes, businesses,and belongings by following these requirements.It’s just good business.