Complying with the flood insurance requirements can be challenging and failure to do so carries the risk of civil money penalties. Here are a few things to remember:
Standard Flood Hazard Determination Forms
- Obtaining a flood determination as early as possible in the underwriting process is a “sound” practice. This allows the borrower to get flood insurance and helps ensure compliance.
- A copy of a Standard Flood Hazard Determination Form may be provided to applicants but giving it does not fulfill any compliance requirements.
- A notice must be delivered to the borrower each and every time a loan secured by a structure located in a Special Flood Hazard Area is made, increased, renewed or extended. This is true even if flood insurance under the NFIP is not available.
- Sending the notice to one borrower is sufficient and a record of the borrower’s receipt of the notice must be obtained.
- A security interest taken as an abundance of caution does not relieve an institution of its flood insurance responsibilities and requirements.
- Cross-collateralization clauses can trigger the flood insurance requirements.
Notice of Special Flood Hazards
- A notice must be delivered to the borrower each and every time a loan secured by a structure located in a Special Flood Hazard Area is made, increased, renewed or extended. This is true even if flood insurance under the NFIP is not available.
- Sending the notice to one borrower is sufficient and a record of the borrower’s receipt of the notice must be obtained.
Flood Insurance Coverage
- A security interest taken as an abundance of caution does not relieve an institution of its flood insurance responsibilities and requirements.
- Cross-collateralization clauses can trigger the flood insurance requirements.
There is so much more to know about flood insurance compliance so be sure to check out our two-part webinar series that is available now OnDemand.
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- Extremely useful! Your flood webinars are the best ones out there.
- I learned a great deal about Flood Insurance requirements, NFIP, private flood insurance and the force placement of flood insurance.
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Published 2026/11/14