A property located in a Special Flood Hazard Area (Zone AE) is under contract with buyers obtaining conventional financing. Which disclosure requirement applies to this transaction?
Correct Answer
C) The lender must provide the borrower with a flood hazard determination notice and flood insurance requirement disclosure
Under the National Flood Insurance Act and the Flood Disaster Protection Act (42 U.S.C. § 4012a), when a property securing a federally related mortgage loan is located in a Special Flood Hazard Area, the lender is required to provide the borrower with written notice of the flood hazard determination and the mandatory flood insurance purchase requirement. This is a federally mandated lender obligation in all conventional financing transactions involving SFHA properties.
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HOA disclosure requires informing buyers about the existence, rules, fees, financial health, and restrictions of a homeowners association governing the property. This information helps buyers understand their obligations before purchase.
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A material defect is a condition that significantly affects the value, desirability, or safety of a property and that would likely influence a reasonable buyer's decision to purchase or the price they would pay.
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