Q: If a lender is a participant in a syndicated transaction, what are the lender's obligations with respect to the acceptance of private flood insurance policies? Is the participating lender obligated to review the policy to determine whether it meets the definition of private flood insurance?
A: So Q&A #4 from the 2009 Interagency flood insurance Q&As addresses this question. The Q&A explains that, with respect to loan syndications and participations, individual participating lenders are responsible for ensuring compliance with flood insurance requirements even if the agreement among the lenders may assign the compliance duties to the lead lender. The requirements for loan syndications and participations would not change for private flood insurance policies.
Each participating lender would need to perform upfront due diligence to ensure that the lead lender has undertaken the necessary steps to have adequate controls to monitor the loan(s) on an ongoing basis for compliance with the flood insurance requirements. This would include ensuring that a private flood insurance policy obtained by the lead lender is compliant with either the mandatory acceptance or the discretionary acceptance provisions.
This Q&A was part of the discussion in the Outlook Live – 2019 Interagency Flood Insurance Update on Private Flood Insurance Rule webinar held on 6/18/19 and focused on the new private flood insurance rules that become effective 7/1/19. Information may be found here: https://www.webcaster4.com/Webcast/Page/577/30085