Q: Condo and Co-op 10 – What flood insurance requirements apply to a loan secured by a share in a cooperative building that is located in an SFHA?
A: It is important to recognize the difference between ownership of a condominium and a cooperative. Although an owner of a condominium owns title to real property, a cooperative unit holder holds stock in a corporation with the right to occupy a particular unit, but owns no title to the building. As a result, a loan to a cooperative unit owner, secured by the owner’s share in the cooperative, is not a designated loan that is subject to the Act or the Regulation.
Although there is no requirement under the Act or Regulation to purchase flood insurance on the cooperative building if the loan is secured by the unit owner’s share in the cooperative, for safety and soundness purposes, residential or non-residential cooperative buildings may be insured by the association or corporation under the General Property Form. The entity that owns the cooperative building, not the individual unit members, is the named insured.