[Ginji244]

We are closing a loan next week that requires flood insurance coverage. We received the flood insurance application, during our review we noticed that the effective date is 30 days after the date of purchase/closing. I understand there is a 30 day waiting period in most cases but isn’t there an exemption when closing a new loan on a purchase?

[rcooper]

You’re correct there is typically a 30 day waiting period. However, if purchasing flood insurance in connection with making, increasing, extending or renewing a mortgage loan there is not a 30 day waiting period. See this link: https://www.floodsmart.gov/flood-insurance-cost/terms

[Ginji244]

Thank you Robin, I appreciate the response and especially the link.

[Ginji244]

A follow up question….if flood insurance is cancelled, we send out the required 45 day notification and receive proof of new coverage (via a standard flood insurance application) and proof of payment, does this fall under the definition of making, increasing, extending or renewing a loan. The insurance company has a 30-day waiting period on the application. Do we need to force place in the interim, if there is a waiting period? Thank you.

[rcooper]

Per FEMA A 30-day waiting period must pass before most flood policies become active. Some policies, however, start sooner:

If your building is newly designated in a high-risk Special Flood Hazard Area, and you buy flood insurance within the 13-month period following a map revision: One-day waiting period.
If you buy flood insurance in connection with making, increasing, extending or renewing your mortgage loan: No waiting period.
If you select additional insurance as an option on your flood insurance policy renewal bill: No waiting period.
If your property is affected by flooding on burned federal land, and the policy is purchased within 60 days of the fire-containment: Possible waiver of waiting period.

Since it doesn’t meet one of these, yes, if the policy was cancelled or expired then a new 30 day wait period would apply. If you force-place through NFIP/MPPP there will be a 30 day wait period (private policies could differ), but if the policy lasped there should be a 30 day grace period that would cover your 30 day wait period if you fp at date of lapse.

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