Int Q&A – Other Security Interests 6 – If the loan request is to finance inventory stored in a building located within an SFHA, but the building is not security for the loan, is flood insurance required?

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Q:  Other Security Interests 6 – If the loan request is to finance inventory stored in a building located within an SFHA, but the building is not security for the loan, is flood insurance required?
 
A:   No. The Act and the Regulation provide that a lender shall not make, increase, extend, or renew a designated loan, that is, a loan secured by a building or mobile home located or to be located in an SFHA, “unless the building or mobile home and any personal property securing the loan is covered by flood insurance for the term of the loan.” In this example, the loan is not a designated loan because it is not secured by a building or mobile home; rather, the collateral is the inventory alone.
 
 
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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