A property's NHD report shows it is located in a FEMA Special Flood Hazard Area. The buyer is financing the purchase with a conventional mortgage through a federally regulated lender. Which of the following insurance requirements will the lender MOST likely impose?
Correct Answer
B) Flood insurance as a condition of loan approval, typically obtained through the NFIP or a private flood insurer
Under the Flood Disaster Protection Act of 1973 and the National Flood Insurance Reform Act of 1994, federally regulated lenders — including those originating conventional loans — are prohibited from making, increasing, extending, or renewing a loan secured by improved real estate in a FEMA Special Flood Hazard Area unless the property is covered by flood insurance for the life of the loan. This requirement applies regardless of whether the loan is government-backed. Coverage is typically obtained through the National Flood Insurance Program (NFIP) or a qualifying private flood insurer.
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Previous Question
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Next Question
A seller in Chico, California, has a property that was recently remapped by FEMA from Zone X (minimal flood risk) to Zone AE (high-risk flood zone). The seller received notice of the map change but has not updated the NHD. A buyer submits an offer. What must the seller do?