Flood insurance purchase and compliance requirements and escrow accounts (the mandatory purchase requirement for loans secured by property in a special flood hazard area)

What this document is

42 U.S.C. s. 4012a: Flood insurance purchase and compliance requirements and escrow accounts (the mandatory purchase requirement for loans secured by property in a special flood hazard area) is a state statute published by U.S. Government Publishing Office (govinfo.gov). It is one of the documents that insurance license exam questions are written from, including property & casualty, personal lines practice questions. This page summarizes it and points to the official version, which is the text to rely on.

Sections cited in practice questions

Each practice answer shows the exact passage it comes from. These are sections of this document that questions cite, with a short excerpt from the source text.

• 42 U.S.C. § 4012a(b)(1)(A) (Requirement for mortgage loans, regulated lending institutions)

  “(A) not to make, increase, extend, or renew any loan secured by improved real estate or a mobile home located or to be located in an area that has been identified by the Administrator as an area having special flood hazards and in which flood insurance has been made available under the National...”

• 42 U.S.C. § 4012a(e)(2) (Purchase of coverage on behalf of borrower)

  “If the borrower fails to purchase such flood insurance within 45 days after notification under paragraph (1), the lender or servicer for the loan shall purchase the insurance on behalf of the borrower and may charge the borrower for the cost of premiums and fees incurred by the lender or servicer...”

• 42 U.S.C. § 4012a(a) (Amount and term of coverage, final sentence)

  “The requirement of maintaining flood insurance shall apply during the life of the property, regardless of transfer of ownership of such property.”

• 42 U.S.C. § 4012a(b)(7) (Private flood insurance defined)

  “(7) Private flood insurance defined In this subsection, the term "private flood insurance" means an insurance policy that - (A) is issued by an insurance company that is - (i) licensed, admitted, or otherwise approved to engage in the business of insurance in the State or jurisdiction in which the...”

• 42 U.S.C. § 4012a(c)(3) (Detached structures)

  “(3) Detached structures Notwithstanding any other provision of this section, flood insurance shall not be required, in the case of any residential property, for any structure that is a part of such property but is detached from the primary residential structure of such property and does not serve as a residence.”

• 42 U.S.C. § 4012a(d)(1)(B) (Escrow of flood insurance payments, limitation)

  “(B) Limitation Except as may be required under applicable State law, a Federal entity for lending regulation may not direct or require a regulated lending institution to deposit premiums or fees for flood insurance under the National Flood Insurance Act of 1968 in an escrow account on behalf of a...”

• 42 U.S.C. § 4012a(e)(4) (Sufficiency of demonstration)

  “(4) Sufficiency of demonstration For purposes of confirming a borrower's existing flood insurance coverage, a lender or servicer for a loan shall accept from the borrower an insurance policy declarations page that includes the existing flood insurance policy number and the identity of, and contact...”

• 42 U.S.C. § 4012a(e)(5)(C) (Effect of failure to respond)

  “(C) Effect of failure to respond If a request under subparagraph (A) is made in connection with the origination of a loan and the Administrator fails to provide a letter under subparagraph (A) before the later of (i) the expiration of the 45-day period under such subparagraph, or (ii) the closing...”

• 42 U.S.C. § 4012a(f)(1) (Civil monetary penalties against regulated lenders)

  “(1) Civil monetary penalties against regulated lenders Any regulated lending institution that is found to have a pattern or practice of committing violations under paragraph (2) shall be assessed a civil penalty by the appropriate Federal entity for lending regulation in the amount provided under paragraph (5).”

• 42 U.S.C. § 4012a(h)(1) (Fee for determining location, borrower fee)

  “(h) Fee for determining location Notwithstanding any other Federal or State law, any person who makes a loan secured by improved real estate or a mobile home or any servicer for such a loan may charge a reasonable fee for the costs of determining whether the building or mobile home securing the...”

• 42 U.S.C. § 4012a(b)(1)(A) (Regulated lending institutions)

  “unless the building or mobile home and any personal property securing such loan is covered for the term of the loan by flood insurance in an amount at least equal to the outstanding principal balance of the loan or the maximum limit of coverage made available under the Act with respect to the...”

• 42 U.S.C. § 4012a(c)(2) (Small loans)

  “(2) Small loans Notwithstanding any other provision of this section, subsections (a) and (b) shall not apply to any loan having - (A) an original outstanding principal balance of $5,000 or less; and (B) a repayment term of 1 year or less.”

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