Lender Flood Insurance Requirements

12 CFR Part 339

The FDIC's flood-insurance rule (implementing the Flood Disaster Protection Act of 1973 and National Flood Insurance Act of 1968, 42 U.S.C. 4001 et seq.) bars an FDIC-supervised institution from making, increasing, extending, or renewing any loan secured by a building or mobile home located in a FEMA-designated special flood hazard area unless the structure (and any personal property securing the loan) is covered by flood insurance for the loan term in an amount at least equal to the lesser of the outstanding principal balance or the maximum NFIP coverage available for that property type. It also requires written borrower notice of the flood hazard (Sec. 339.9), mandatory escrow of premiums for residential designated loans made or renewed on or after January 1, 2016 (Sec. 339.5, subject to exemptions), and force placement of flood insurance when coverage lapses or is inadequate (Sec. 339.7).