Origination ActivitiesQuestion 235 of 400
A flood determination shows the subject property sits in a Special Flood Hazard Area (SFHA), and the loan is federally related. What must the lender require?
a.Flood insurance be maintained on the improvements for the life of the loan
b.The borrower waive any right to flood coverage in writing
c.The property be re-appraised at a higher value
d.The loan be denied automatically
Explanation
Under the Flood Disaster Protection Act, when a federally related loan secures a building in an SFHA, the lender must require flood insurance covering the improvements for the term of the loan. Being in an SFHA does not by itself require denial or re-appraisal.
Law Reference: Flood Disaster Protection ActPractice all 400 questions free — no signup required.
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