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<br />SECTION 206.1 OF THE COMPTROLLER'S HANDBOOK FOR CONSUMER EXAMINATIONS,
<br />COMPTROLLER OF THE CURRENCY
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<br />Flood Disaster Protection Act
<br />Introduction
<br />
<br />Section 206.1
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<br />At the time 01 loan ClOsing. a copy 01 the flood insurance
<br />application or the FEMA Proof of Purchase Certificate,
<br />indicating that the full premium has been paid, is suf.
<br />licient evidence that application has been made lor the
<br />purchasa 0I11ood insurance, II there is a transfer of title,
<br />the new owner applies for coverage II or before closing
<br />and the insurance gqes into elIect 1112:01 a.m. on the
<br />day fcIlowing application and payment,
<br />
<br />When no tr-'8r of title OCCUIS, the waiting period lor
<br />flood insurance c:overage is five days, ~ inIt~
<br />tutions may close a loan during thel wailing period,
<br />knowing thallhe policy is not yet in elIect, They should,
<br />however, require the borrower to purchue coverage
<br />promptly 10 thai the policy becomes elIective on or
<br />about the dlle of closing,
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<br />Flood insurance is written annually, and financial insti-
<br />tutions musl ensure tIlaI the coverage is renewed and
<br />maimained lor the duration of the loan. II the borTower
<br />does not reMW the policy, the financial institution may
<br />renew ~ CI< call the loan assuming the ability to do 10 is
<br />wrillen into the contract. When designated u mon-
<br />gag", the financial institution generally receives a
<br />copy of the policy and all _al notices,
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<br />The loan closing and lien recording lor COI'lIlruction
<br />loans may occur before any disbursement of funds.
<br />Flood insurance required lor \hole loans need not ex.
<br />ceed the amoum of the financial institution's lOIal dis-
<br />bursement to dale, In those situations, proof 01 pur-
<br />chese is required only at the lime funds are disbursed
<br />and not at the time 01 closing.
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<br />Lim~s 01 coverage under the _rgency and regular
<br />programs are listed in FEMA's ...1 publication con-
<br />ceming mandatory flood insurll'lC8 purchase require-
<br />mems, In ~ral. lhe maximum amount of required
<br />flood insurance lor covered property located in a c0m-
<br />munity participating in the emergency IlIllllram is also
<br />the maximum amoum 01 available insurll'lC8, The max-
<br />imu", amount 01 required insurance lor covered prop-
<br />erty located in a community participating in the regular
<br />program is only twice tIlaI required by the ~ K;Y
<br />program, and is less than the maximum amount of
<br />available coverage,
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<br />The administration 01 flood inlurance requirements 01
<br />the FOPA should conform u clolely u practicable to
<br />normal commercial lending practices, Thus, atthougII
<br />IIood inSurll'lC8 is required in the amount of the loan or
<br />lIIe maximum amount available under the program,
<br />whichever is less, the amoum of the insurance required
<br />may be reduced by the value 01 the land imIoIYed, when
<br />the proposed loan clearly exceeds the value of the
<br />improvements, However, such a reduction is not ,.
<br />quired, Private lenders thet do not normally appraise
<br />land values separately, and that generally require lire
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<br />insurance lor the full amount 01 the loan, ere free to
<br />IoItow the same praclica, to the extent OIherwise per.
<br />milled by law, with respeclto flood insurance,
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<br />For example, II 90 percent 01 the cost of a 55 million
<br />_ lYIIem consisted of underground lines and un-
<br />derground pumping stations, and the balance 01 the
<br />cost rept'11I"1led above ground buildings, flood insur.
<br />ance would be required only on the S5OO.ooo portion 01
<br />the project lhIl wu eligible lor insurance. IIlh1l portion
<br />COI'lIiIled of onty two equally valued buildings within a
<br />corrmunIty In the regular IlIllllram, only S2OO,ooo on
<br />NCh building would be required. lithe two buildings
<br />__ valued at $100,000 and S4OO,ooo, the $100,000
<br />and S2OO,ooo of insurance, respeclively. would be ,.
<br />quired,
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<br />RecordkeepIng
<br />F'manciaI institutions must maintain auf. 22.5
<br />ficienl records lor each loan to indicate
<br />the method used to determine whelher improo;ed real
<br />estate or a mobile home oIlered u IlCUrity lor a loan is
<br />IocaIed in a flood haZard _. Such records may be:
<br />. Copies of official maps.
<br />. Written contracts bel\.aan the inItitution and the
<br />Ijlpraiser,
<br />. WritIen stalementa in IICh file lhIl indicate lhIlen
<br />appraiser has performed the flood Chllck.
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<br />Institulions should elso retain appropriate documents 4-
<br />what ..... the property securing the loan is in a tlood
<br />hazard area, Those documarU nwy consist 01:
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<br />. Copies of the nolicas provided to the borTower.
<br />. The borrower's wrlIIen ~adgemenlof ,.
<br />caipt.
<br />. lithe purchase Iequi_ 4 applies, a copy 0I1he
<br />flood Insurance policy. FinIncial inItifulions may
<br />cIloose 10, but need not, indicate on their records
<br />lhIl propeIty securing a particular loan is not in e
<br />lIaod haZard area,
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<br />PenaItles and Uabllities
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<br />No specifiC ciYH 01' criminal pretties 01' Iiabil~ies are
<br />prOllided lor the FDfll\.. AdministraliWl actions lor viola.
<br />lions may be pursued under the genera' regulalory pow.
<br />ers 01 the respective supervisory agency: However. H the
<br />tirenci.llnst~ulion has not met all 01 the requiremanls of
<br />the FORt. end the borrower sustains a loss because 01
<br />Ilooding, e financial insUlUlion may run the risk 01 being
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