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Notice Of Special Flood Hazards

What is Notice of Special Flood Hazards?

Notice Of Special Flood Hazards

Notice of Special Flood Hazards disclosure informs the borrower that the property securing the mortgage loan is located in a special flood hazard area and the borrower is required to obtain flood insurance before the lender can extend the loan. The notice also provides details on the flood insurance requirements, the availability of NFIP flood insurance, and whether Federal disaster relief assistance may be available in the event of damage to the property caused by flooding.

At the time of processing the loan application, the lender identifies if the property is in a special flood hazard area and if flood insurance is required and available. If the property is in a special flood hazard area, the lender sends the Notice of Special Flood Hazards to the borrower informing the borrower of the requirement to obtain flood insurance. The lender cannot fund and close the loan without receiving the proof of obtaining flood insurance. The lender has to retain evidence of the receipt of the notices by the borrower and the servicer for the period of time the lender owns the loan.

he Notice of Special Flood Hazards is required under Regulation H (12 CFR 208.25).

Recent Regulatory Amendments

Regulation H was amended on July 21, 2015 (80 FR 43247) which will be effective from January 1, 2016. The new rules amend the content requirements for Notice of Special Flood Hazards. The model form has also changed.

Source :www.MortgagesAnalyzed.com

Contents of Notice of Special Flood Hazards

The Notice of Special Flood Hazards contains the following information:

  1. A warning that the property is or will be located in a special flood hazard area.
  2. A description of the flood insurance purchase requirements. This section includes the minimum amount of flood insurance that must be obtained.
  3. A statement, where applicable, that flood insurance coverage is available under the NFIP and may also be available from private insurers.
  4. A statement whether Federal disaster relief assistance may be available in the event of damage to the building or mobile home caused by flooding in a federally declared disaster.
  5. Acknowledgement that the borrower has received the notice.
Source :www.MortgagesAnalyzed.com

Borrower's Considerations

Obtain Flood Insurance

The notice is informing you of the fact that the property is located in a high risk flood area. This information should be consistent with the disclosures provided a by the seller.

Record Keeping

As per federal regulations (Regulation H - 12 CFR 2018), you should maintain a record of the receipt of the notices by the borrower and the servicer for the period of time that you own the loan. Additionally, we recommend you maintain a copy of the actual notice sent to the borrower.

Timing

You must send the notice to the borrower within a reasonable time before the completion of the transaction.

The notice must also be provided to the servicer as promptly as practicable after you provided notice to the borrower. In any case, you need to provide the notice to the servicer no later than the time when you provided similar notices to the servicer concerning hazard insurance and taxes. Notice to the servicer may be made electronically or may take the form of a copy of the notice to the borrower.

Receipt of Notice

You have to retain evidence of the receipt of the notices by the borrower and the servicer for the period of time the lender owns the loan. Typically, this is performed by including an acknowledgement section at the end of the notice. The borrower is asked to sign and return a copy of the notice back to the lender.

Alternate Method of Notice

Instead of sending the notice, Regulation H allows you to rely on a written assurance from a seller or lessor, within a reasonable time before the completion of the sale or lease transaction, the seller or lessor has provided the notice to the purchaser or lessee. However, this exposes you to additional risks of non-compliance with flood regulations. Our recommendation is to send the notice directly to the borrower and retain evidence of the delivery.

Source :www.MortgagesAnalyzed.com

Lender's Considerations

Use of Model Form

Appendix A to Regulation H provides a model form that you can use to provide the notice to the borrower. You will be considered to be in compliance if you include all the information in the model form.

Source :www.MortgagesAnalyzed.com

2016 Regulatory Changes

Regulation H was amended on July 21, 2015 (80 FR 43247) and was effective from January 1, 2016. The new rules amend the content requirements for Notice of Special Flood Hazards. The model form has also changed.

Source :www.MortgagesAnalyzed.com
 

Document Summary

 
Notice Of Special Flood Hazards
Purpose
Notice of Special Flood Hazards disclosure informs the borrower that the property securing the mortgage loan is located in a special flood hazard area and the requirement to obtain flood insurance before the lender can extend the loan.
Use in Mortgages
The disclosure informs the borrower of insurance requirements that must be met before the lender can close the loan. The lender uses the disclosure to satisfy the notice requirements under Regulation H
Common Names
  • Notice of Special Flood Hazards and Availability of Federal Disaster Relief Assistance
  • Notice Of Special Flood Hazards
  • Flood Disclosure
Type
Disclosure
Provided By
Lender
Provided To
Borrower
Notarization Required
No
Signed By
Not required
Life Cycle Stage
Origination, Servicing
Recordkeeping
The notice should be retained for as long as the loan is outstanding
Model Form
Appendix A to Regulation H ยง208.25, 12 CFR 208.25
Applicable Laws
Regulation H (12 CFR 208.25)
Source :www.MortgagesAnalyzed.com

Updated: Feb 20, 2016

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It informs the property is in a flood zone and insurance is required.
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