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2000 - Rules and Regulations
{{10-31-07 p.2663}}
PART 339LOANS IN AREAS HAVING SPECIAL FLOOD HAZARDS
Sec. 339.1
Authority, purpose, and scope.
339.2
Definitions.
339.3
Requirement to purchase flood insurance where available.
339.4
Exemptions.
339.5
Escrow requirement.
339.6
Required use of standard flood hazard determination form.
339.7
Forced placement of flood insurance.
339.8
Determination fees.
339.9
Notice of special flood hazards and availability of federal disaster
relief assistance.
339.10
Notice of servicer's identity.
Appendix A to Part
339Sample Form of Notice of Special Flood Hazards and Availability of
Federal Disaster Relief Assistance
AUTHORITY: 42 U.S.C. 4012a, 4104a, 4104b, 4106, and 4128.
SOURCE: The provisions of this Part 339 appear at 61 Fed. Reg.
47506, August 29, 1996, except as otherwise
noted.
§ 339.1 Authority, purpose, and scope.
(a) Authority. This part is issued pursuant to 42 U.S.C.
4012a, 4104a, 4104b, 4106, and 4128.
(b) Purpose. The purpose of this part is to implement
the requirements of the National Flood Insurance Act of 1968 and the
Flood Disaster Protection Act of 1973, as amended
(42 U.S.C. 4001-4129).
(c) Scope. This part, except for §§ 339.6 and 339.8,
applies to loans secured by buildings or mobile homes located or to be
located in areas determined by the Director of the Federal Emergency
Management Agency to have special flood hazards. Sections 339.6 and
339.8 apply to loans secured by buildings or mobile homes, regardless
of location.
[Codified to 12 C.F.R. § 339.1]
[Section 339.1 amended at 61 Fed. Reg. 45706, August 29,
1996, effective October 1,
1996]
§ 339.2 Definitions.
(a) Act means the National Flood Insurance Act of 1968,
as amended (42 U.S.C. 4001--4129).
(b) Bank means an insured state nonmember bank and an
insured state branch of a foreign bank or any subsidiary of an insured
state nonmember bank.
(c) Building means a walled and roofed structure, other
than a gas or liquid storage tank, that is principally above ground and
affixed to a permanent site, and a walled and roofed structure while in
the course of construction, alteration, or repair.
(d) Community means a state or a political subdivision
of a State that has zoning and building code jurisdiction over a
particular area having special flood hazards.
(e) Designated loan means a loan secured by a building
or mobile home that is located or to be located in a special flood
hazard area in which flood insurance is available under the Act.
(f) Director of FEMA means the Director of the Federal
Emergency Management Agency.
(g) Mobile home means a structure, transportable in one
or more sections, that is built on a permanent chassis and designed for
use with or without a permanent foundation when attached to the
required utilities. The term mobile home does not include a
recreational vehicle. For purposes of this part, the term mobile
home means a mobile home on a permanent foundation. The term
mobile home includes a manufactured home as that term is
used in the NFIP.
{{10-31-07 p.2664}}
(h) NFIP means the National Flood Insurance Program
authorized under the Act.
(i) Residential improved real estate means real estate
upon which a home or other residential building is located or to be
located.
(j) Servicer means the person responsible for:
(1) Receiving any scheduled, periodic payments from a borrower
under the terms of a loan, including amounts for taxes, insurance
premiums, and other charges with respect to the property securing the
loan; and
(2) Making payments of principal and interest and any other
payments from the amounts received from the borrower as may be required
under the terms of the loan.
(k) Special flood hazard area means the land in the
flood plain within a community having at least a one percent chance of
flooding in any given year, as designated by the Director of FEMA.
(l) Table funding means a settlement
at which a loan is funded by a contemporaneous advance of loan funds
and an assignment of the loan to the person advancing the funds.
[Codified to 12 C.F.R. § 339.2]
[Section 339.2 amended at 61 Fed. Reg. 45706, August
29, 1996, effective October 1,
1996]
§ 339.3 Requirement to purchase flood insurance where
available.
(a) In general. A bank shall not make, increase, extend,
or renew any designated loan unless the building or mobile home and any
personal property securing the loan is covered by flood insurance for
the term of the loan. The amount of insurance must be at least equal to
the lesser of the outstanding principal balance of the designated loan
or the maximum limit of coverage available for the particular type of
property under the Act. Flood insurance coverage under the Act is
limited to the overall value of the property securing the designated
loan minus the value of the land on which the property is located.
(b) Table funded loans. A bank that acquires a loan from
a mortgage broker or other entity through table funding shall be
considered to be making a loan for the purpose of this part.
[Codified to 12 C.F.R. § 339.3]
[Section 339.3 amended at 61 Fed. Reg. 45707, August 29,
1996, effective October 1,
1996]
§ 339.4 Exemptions.
The flood insurance requirement prescribed by § 339.3 does not
apply with respect to:
(a) Any state-owned property covered under a policy of
self-insurance satisfactory to the Director of FEMA, who publishes and
periodically revises the list of states falling within this exemption;
or
(b) Property securing any loan with an original principal balance
of $5,000 or less and a repayment term of one year or less.
[Codified to 12 C.F.R. § 339.4]
[Section 339.4 amended at 61 Fed. Reg. 45707, August
29, 1996, effective October 1,
1996]
§ 339.5 Escrow requirement.
If a bank requires the escrow of taxes, insurance premiums, fees, or
any other charges for a loan secured by residential improved
real estate or a mobile home that is made, increased, extended, or
renewed on or after October 1, 1996, the bank shall also require the
escrow of all premiums and fees for any flood insurance required under
§ 339.3. The bank, or a servicer acting on behalf of the bank, shall
deposit the flood insurance premiums on behalf of the borrower in an
escrow account. This escrow account will be subject to escrow
requirements adopted pursuant to section 10 of the Real Estate
Settlement Procedures Act of 1974 (12
U.S.C. 2609) (RESPA), which generally limits the amount that
may be maintained in escrow accounts for certain types of loans and
requires escrow account statements for those accounts, only if the loan
is otherwise subject to RESPA. Following receipt of a notice from the
Director of FEMA or other provider of flood insurance
that
{{12-30-99 p.2664.01}}premiums are due, the bank, or a
servicer acting on behalf of the bank, shall pay the amount owed to the
insurance provider from the escrow account by the date when such
premiums are due.
[Codified to 12 C.F.R. § 339.5]
[Section 339.5 amended at 61 Fed. Reg. 45707, August
29, 1996, effective October 1,
1996]
§ 339.6 Required use of standard flood hazard determination
form.
(a) Use of form. A bank shall use the standard flood
hazard determination form developed by the Director of FEMA when
determining whether the building or mobile home offered as collateral
security for a loan is or will be located in a special flood hazard
area in which flood insurance is available under the Act. The standard
flood hazard determination form may be used in a printed, computerized,
or electronic manner. A non-member bank may obtain the standard flood
hazard determination form by written request to FEMA, P.O. Box 2012,
Jessup, MD 20794--2012.
(b) Retention of form. A bank shall retain a copy of the
completed standard flood hazard determination form, in either hard copy
or electronic form, for the period of time the bank owns the loan.
[Codified to 12 C.F.R. § 339.6]
[Section 339.6 amended at 61 Fed. Reg. 45707, August
29, 1996, effective October 1, 1996; 64 Fed. Reg. 71274, December 21,
1999]
§ 339.7 Forced placement of flood insurance.
If a bank, or a servicer acting on behalf of the bank, determines,
at any time during the term of a designated loan, that the building or
mobile home and any personal property securing the designated loan is
not covered by flood insurance or is covered by flood insurance in an
amount less than the amount required under § 339.3, then the bank or
its servicer shall notify the borrower that the borrower should obtain
flood insurance, at the borrower's expense, in an amount at least equal
to the amount required under § 339.3, for the remaining term of the
loan. If the borrower fails to obtain flood insurance within 45 days
after notification, then the bank or its servicer shall purchase
insurance on the borrower's behalf. The bank or its servicer may charge
the borrower for the cost of premiums and fees incurred in purchasing
the insurance.
[Codified to 12 C.F.R. § 339.7]
[Section 339.7 added at 60 Fed. Reg. 35288, July 6, 1995,
effective January 2, 1996; 61 Fed. Reg. 45707, August 29, 1996,
effective October 1, 1996]
§ 339.8 Determination fees.
(a) General. Notwithstanding any federal or state law
other than the Flood Disaster Protection Act of 1973, as amended (42
U.S.C. 4001--4129), any bank, or a servicer acting on behalf of the
bank, may charge a reasonable fee for determining whether the building
or mobile home securing the loan is located or will be located in a
special flood hazard area. A determination fee may also include, but is
not limited to, a fee for life-of-loan monitoring.
(b) Borrower fee. The determination fee authorized by
paragraph (a) of this section may be charged to the borrower if the
determination:
(1) Is made in connection with a making, increasing, extending,
or renewing of the loan that is initiated by the borrower;
(2) Reflects the Director of FEMA's revision or updating of
floodplain areas or flood-risk zones;
(3) Reflects the Director of FEMA's publication of a notice or
compendium that:
(i) Affects the area in which the building or mobile home
securing the loan is located; or
(ii) By determination of the Director of FEMA, may reasonably
require a determination whether the building or mobile home securing
the loan is located in a special flood hazard area; or
{{12-30-99 p.2664.02}}
(4) Results in the purchase of flood insurance coverage by the
lender or its servicer on behalf of the borrower under § 339.7.
(c) Purchaser or tranferee fee. The determination fee
authorized by paragraph (a) of this section may be charged to the
purchaser or transferee of a loan in the case of the sale or transfer
of the loan.
[Codified to 12 C.F.R. § 339.8]
[Source: Section 339.8 added at 61 Fed. Reg. 45707,
August 29, 1996, effective October 1,
1996]
§ 339.9 Notice of special flood hazards and availability of
federal disaster relief assistance.
(a) Notice requirement. When a bank makes, increases,
extends, or renews a loan secured by a building or a mobile home
located or to be located in a special flood hazard area, the bank shall
mail or deliver a written notice to the borrower and to the servicer in
all cases whether or not flood insurance is available under the Act for
the collateral securing the loan.
(b) Contents of notice. The written notice must include
the following information:
(1) A warning, in a form approved by the Director of FEMA, that
the building or the mobile home is or will be located in a special
flood hazard area;
(2) A description of the flood insurance purchase requirements
set forth in section 102(b) of the Flood Disaster Protection Act of
1973, as amended (42 U.S.C.
4012a(b));
(3) A statement, where applicable, that flood insurance coverage
is available under the NFIP and may also be available from private
insurers; and
(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.
(c) Timing of notice. The bank shall provide the notice
required by paragraph (a) of this section to the borrower within a
reasonable time before the completion of the transaction, and to the
servicer as promptly as practicable after the bank provides notice to
the borrower and in any event no later than the time the bank provides
other 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.
(d) Record of receipt. The bank shall retain a record of
the receipt of the notices by the borrower and the servicer for the
period of time the bank owns the loan.
(e) Alternate method of notice. Instead of providing the
notice to the borrower required by paragraph (a) of this section, a
bank may obtain satisfactory written assurance from a seller or lessor
that, within a reasonable time before the completion of the sale or
lease transaction, the seller or lessor has provided such notice to the
purchaser or lessee. The bank shall retain a record of the written
assurance from the seller or lessor for the period of time the bank
owns the loan.
(f) Use of prescribed form of notice. A bank will be
considered to be in compliance with the requirement for notice to the
borrower of this section by providing written notice to the borrower
containing the language presented in appendix A to this part within a
reasonable time before the completion of the transaction. The notice
presented in appendix A to this part satisfies the borrower notice
requirements of the Act.
[Codified to 12 C.F.R. § 339.9]
[Source: Section 339.9 added at 61 Fed. Reg. 45708,
August 29, 1996, effective October 1,
1996]
§ 339.10 Notice of servicer's identity.
(a) Notice requirement. When a bank makes, increases,
extends, renews, sells, or transfers a loan secured by a building or
mobile home located or to be located in a special flood hazard area,
the bank shall notify the Director of FEMA (or the Director of FEMA's
designee) in writing of the identity of the servicer of the loan. The
Director of FEMA has designated the insurance provider to receive the
bank's notice of the servicer's identity.
{{8-30-96 p.2664.03}}This notice may be provided
electronically if electronic transmission is satisfactory to the
Director of FEMA's designee.
(b) Transfer of servicing rights. The bank shall notify
the Director of FEMA (or the Director of FEMA's designee) of any change
in the servicer of a loan described in paragraph (a) of this section
within 60 days after the effective date of the change. This notice may
be provided electronically if electronic transmission is satisfactory
to the Director of FEMA's designee. Upon any change in the servicing of
a loan described in paragraph (a) of this section, the duty to provide
notice under this paragraph (b) shall transfer to the transferee
servicer.
[Codified to 12 C.F.R. § 339.10]
[Section 339.10 added at 61 Fed. Reg. 45708, August 29,
1996, effective October 1, 1996]
Appendix A to Part 339Sample Form of Notice of Special Flood
Hazards and Availability of Federal Disaster Relief Assistance
We are giving you this notice to inform you that:
The building or mobile home securing the loan for which you have
applied is or will be located in an area with special flood hazards.
The area has been identified by the Director of the Federal
Emergency Management Agency (FEMA) as a special flood hazard area using
FEMA's Flood Insurance Rate Map or the Flood Hazard
Boundary Map for the following community: _______ . This
area has at least a one percent (1%) chance of a flood equal to or
exceeding the base flood elevation (a 100-year flood) in any given
year. During the life of a 30-year mortgage loan, the risk of a
100-year flood in a special flood hazard area is 26 percent (26%).
Federal law allows a lender and borrower jointly to request the
Director of FEMA to review the determination of whether the property
securing the loan is located in a special flood hazard area. If you
would like to make such a request, please contact us for further
information.
____________________________________________ The community in which the property securing the loan
is located participates in the National Flood Insurance Program (NFIP).
Federal law will not allow us to make you the loan that you have
applied for if you do not purchase flood insurance. The flood insurance
must be maintained for the life of the loan. If you fail to purchase or
renew flood insurance on the property, federal law authorizes and
requires us to purchase the flood insurance for you at your expense.
Flood insurance coverage under the NFIP may be purchased
through an insurance agent who will obtain the policy either directly
through the NFIP or through an insurance company that participates in
the NFIP. Flood insurance also may be available from private insurers
that do not participate in the NFIP.
At a minimum, flood insurance purchased must cover the
lesser of:
(1) the outstanding principal balance of the loan; or
(2) the maximum amount of coverage allowed for the type of
property under the NFIP.
Flood insurance coverage under the NFIP is limited to the overall
value of the property securing the loan minus the value of the land on
which the property is located.
Federal disaster relief assistance (usually in the form of
a low-interest loan) may be available for damages incurred in excess of
your flood insurance if your community's participation in the NFIP is
in accordance with NFIP requirements.
____________________________________________ Flood insurance coverage under the NFIP is not
available for the property securing the loan because the community in
which the property is located does not participate in the NFIP. In
addition, if the non-participating community has been identified for at
least one year as containing a special flood hazard area, properties
located in the community will not be eligible for federal disaster
relief assistance in the event of a federally-declared flood disaster.
[Codified to 12 C.F.R. Part 339, Appendix A]
[Appendix A added at 61 Fed. Reg. 45708, August 29, 1996,
effective October 1, 1996]
{{4-28-00 p.2665}}
NOTE
Guidelines for extending and administering loans in special
flood hazard areas. When federal flood insurance is available for
a community in a designated flood hazard area (i.e., when the
community is participating in the National Flood Insurance
Program), an insured nonmember bank cannot make loans secured by
improved real estate or a mobile home located in the community unless
the property securing the loan is covered by appropriate flood
insurance. However, Part 339 permits an insured nonmember bank to make
loans secured by improved real estate or a mobile home located or to be
located in a designated flood hazard area where the community is
not participating in the National Flood Insurance Program if the
bank gives the proper notices as required by section 339.6. Sample
notices are provided in this section.
The following two examples are included to assist you in determining
which notices must be given to the borrower when making, increasing,
extending, or renewing any loan secured by improved real estate or
mobile home located or to be located in an area that has been
identified by the Directors of the Federal Emergency Management Agency
as an area having special flood hazards. In both instances two
notices must be either mailed or delivered as soon as feasible but
not less than ten days in advance of the closing of the transaction (or
not later than the bank's commitment, if any, if the period between
commitment and closing is less than ten days).
NOTICES TO BE GIVEN WHEN THE COMMUNITY IS PARTICIPATING IN THE
NATIONAL FLOOD INSURANCE PROGRAM.
1. Notice to the borrower that the property is or will be
located in a flood hazard area. With regard to the sample notice
in section 339.6 pertaining to special flood hazards the bank should
complete the notice by entering the name of the borrower in the first
blank space and the name of the relevant community for which the flood
map was issued in the second blank space.
2. Notice to the borrower about the availability of Federal
Disaster Relief Assistance. This notice states that in the event
such property is damaged by flooding in a federally declared disaster,
federal disaster relief assistance, usually in the form of a loan with
a favorable interest rate, may be available for damages incurred in
excess of the flood insurance.
NOTICES TO BE GIVEN WHEN THE COMMUNITY IS NOT PARTICIPATING IN THE
NATIONAL FLOOD INSURANCE PROGRAM.
1. Notice to the borrower that the property is or will be
located in a flood hazard area. Again, the bank should complete
the notice by entering the name of the borrower in the first blank
space and the name of the relevant community for which the flood map
was issued in the second blank space.
2. Notice to the borrower about unavailability of Federal
Disaster Relief Assistance. This notice states that the community
is not participating in the National Flood Insurance Program and the
property is not eligible for federal flood insurance. If the property
is damaged by flooding in a federally declared disaster, federal
disaster relief assistance will not be available if the community has
been identified as a flood-prone area for one year or longer.
Section 339.6 further states that each insured nonmember bank shall
require the borrower, prior to closing, to provide the bank with a
written acknowledgement that the borrower realizes the property
securing the loan is or will be located in a special flood hazard area
and that the borrower has received the appropriate notice regarding
federal disaster relief assistance.
Part 339 does not preclude a bank from requiring on its own that
flood insurance be obtained for improved real estate or a mobile home
securing a loan when the property is located or to be located in a
designated flood hazard area where the community is not participating
in the National Flood Insurance Program. Nor would it preclude the
Veterans Administration or other federal agencies from imposing a
similar flood insurance requirement before providing assistance through
a mortgage insurance, loan, or grant program.
To avoid possible delays in the closing of the loans in areas
having special flood hazards, a bank could accept as proof of flood
insurance at the time of loan closings a
{{4-28-00 p.2666}}copy of the flood insurance
application indicating that the full premium has been paid, a copy of
the mortgagor's check issued in payment of the premium, or the
insurance agent's certification that the mortgagor has purchased the
requisite flood insurance.
The Federal Emergency Management Administration (FEMA) is currently
distributing flood maps to lenders to use in determining whether
improved real estate or a mobile home is located in a designated flood
hazard area. The Community Status Book, a quarterly
publication, provides the following information to the lender with
respect to a community: a) the communities participating in the
National Flood Insurance Program; b) the effective date of currently
effective flood maps; and c) the communities which are not
participating in the National Flood Insurance Program, but
whichhave a FEMA flood map showing special flood
hazard areas.
FEMA has provided the following information regarding flood
insurance:
For program information, such as
community eligibility, call toll-free 800-638-6620. In Maryland call
800-492-6605, and in Alaska, Guam, Hawaii, Puerto Rico and U.S. Virgin
Islands call 800-638-6831.
For general information, write:
Federal Insurance Administration
Federal Emergency Management Agency
500 C Street, S.W.
Washington, D.C. 20472
For map requests and Community Status
Book information, write:
Federal Emergency Management Agency
Flood Map Distribution Center
6930 (A-F) San Tomas Road
Baltimore, Maryland 21227-6227
Or, call toll-free 800-638-6620
[The page following this is 2679.]
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