[Vicki Kramer]

Good morning. When we receive notice that a loan is now in a flood zone, what time limit do we have to have the notice signed and the customer to get us flood insurance? Do we send the notice as soon as we receive it and then allow 10 days for the customer to sign and return it? Do we mail the first letter (per the 45-day letter rules) at the time we receive notice that the map changed? Thanks in advance for your help!

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[rcooper]

As you know, the notification of a map change from your flood vendor is a triggering event to begin your force-place procedures as you now know there is not adequate coverage in place. The flood regulations state:

(FDIC’s regulation)
§ 339.7 Force placement of flood insurance.

(a) Notice and purchase of coverage. If an FDIC-supervised institution, or a servicer acting on its behalf, determines at any time during the term of a designated loan, that the building or mobile home and any personal property securing the designated loan is not covered by flood insurance or is covered by flood insurance in an amount less than the amount required under § 339.3, then the FDIC-supervised institution or its servicer shall notify the borrower that the borrower should obtain flood insurance, at the borrower’s expense, in an amount at least equal to the amount required under § 339.3, for the remaining term of the loan. If the borrower fails to obtain flood insurance within 45 days after notification, then the FDIC-supervised institution or its servicer shall purchase insurance on the borrower’s behalf. The FDIC-supervised institution or its servicer may charge the borrower for the cost of premiums and fees incurred in purchasing the insurance, including premiums or fees incurred for coverage beginning on the date on which flood insurance coverage lapsed or did not provide a sufficient coverage amount.

You would need to send a letter informing the borrower of the map change and their requirement to purchase insurance (force-place procedures) promptly upon learning of the change. You would include the flood notice with the letter; you can also ask them to sign and return the notice, but they may not return it. Another option is to send the force-place letter and notice via certified mail and you will receive a signed receipt you can put in file as “acknowledgement”.

The FEMA 2011 Flood Q&A, p. 7 addresses map changes:https://www.fema.gov/media-library-data/20130726-1742-25045-5644/interagency_q_as.pdf.

[Author]

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