Int Q&A – Mandatory 2 – If a lender has a policy not to originate a mortgage in non-participating communities…do the private flood insurance requirements require a lender to change its policy?

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Q:  MANDATORY 2. If a lender has a policy not to originate a mortgage in non-participating communities or coastal barrier regions where the NFIP is not available, do the private flood insurance requirements under the Regulation require a lender to change its policy?
 
A:   The Regulation does not require that a lender originate a loan that does not meet the lender’s underwriting criteria. The flood insurance purchase requirement only applies to loans secured by structures located or to be located in an SFHA in which flood insurance is available under the Act. The flood insurance purchase requirement does not apply within nonparticipating communities, where NFIP insurance is not available under the Act. See Q&A Applicability 1. Therefore, the lender does not need to change its policy of not originating mortgages in areas where NFIP insurance is unavailable solely because of the private flood insurance requirements under the Regulation.
 
 
ADDITIONAL INFORMATION:
This Q&A was included in the Interagency Questions and Answers Regarding Flood Insurance, which were issued on 05/11/2022.  They were published in the Federal Register on 05/31/2022 and may be found here:  https://www.federalregister.gov/documents/2022/05/31/2022-10414/loans-in-areas-having-special-flood-hazards-interagency-questions-and-answers-regarding-flood
 

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