Flood FAQs #64 – When may a lender rely on a private insurance policy that does not meet the criteria set forth by FEMA?

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Q:  When may a lender rely on a private insurance policy that does not meet the criteria set forth by FEMA?
 
A:   A lender may rely on a private insurance policy that does not meet the criteria set forth by FEMA only in limited circumstances. For example, when a flood insurance policy has expired and the borrower has failed to renew coverage, private insurance policies that do not meet the criteria set forth by FEMA, such as private insurance policies providing portfolio-wide blanket coverage, may be useful protection for the lender for a gap in coverage in the period of time before a force placed policy takes effect. However, the lender must still force place adequate coverage in a timely manner, as required, and may not rely on a private insurance policy that does not meet the criteria set forth by FEMA on an ongoing basis.
 
 
 
ADDITIONAL INFORMATION – This Q&A was included in the “Interagency Questions and Answers Regarding Flood Insurance.”   For ease of collection, this has been obtained from the FDIC’s Compliance Examination Manual – April 2016, which may be found here:  https://fdic.gov/regulations/compliance/manual/5/V-6.1.pdf
 

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