Quick Navigation: Resources by Topic Business
& Economy Education
Environment
Food
& Drugs Grants
& Awards Health
& Safety Military
& Security Science
& Technology Social
Programs Transportation

Site
Search:
advanced

•

Browse

•

Simple
Search

•

Advanced Search

*
Boolean

* Proximity

•

Search
History

•

Search
Tips

•

Corrections

•

Latest
Updates

•

User
Info

•

FAQs

•

Agency
List

•

e-CFR
Main Page

•

Code of Federal
Regulations

•

Federal
Register

•

List of
CFR
Sections Affected

•

Regulations.gov

•

Unified
Agenda

•

All NARA
Publications

Ben's
Guide
to U.S.
Government

Home
Page > Executive
Branch > Code of
Federal Regulations > Electronic Code of Federal
Regulations

e-CFR
Data is current as of July 1, 2008

Title 12:
Banks and Banking

Browse
Previous | Browse
Next

PART 572—LOANS IN AREAS HAVING SPECIAL FLOOD HAZARDS

Section Contents
§ 572.1   Authority,
purpose, and scope.
§ 572.2   Definitions.
§ 572.3   Requirement
to purchase flood insurance where available.
§ 572.4   Exemptions.
§ 572.5   Escrow
requirement.
§ 572.6   Required
use of standard flood hazard determination form.
§ 572.7   Forced
placement of flood insurance.
§ 572.8   Determination
fees.
§ 572.9   Notice
of special flood hazards and availability of Federal disaster relief
assistance.
§ 572.10   Notice
of servicer's identity.
Appendix
A to Part 572—Sample Form of Notice of Special Flood Hazards and
Availability of Federal Disaster Relief Assistance

Authority:   12 U.S.C. 1462, 1462a,
1463, 1464; 42 U.S.C. 4012a, 4104a, 4104b, 4106, and 4128.

Source:   61 FR 45709, Aug. 29, 1996,
unless otherwise noted.

§ 572.1   Authority, purpose, and
scope.

top

(a) Authority. This part is issued pursuant to 12 U.S.C. 1462,
1462a, 1463, 1464 and 42 U.S.C. 4012a, 4104a, 4104b, 4106, 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 §§572.6 and 572.8, 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 572.6 and 572.8 of this
part apply to loans secured by buildings or mobile homes, regardless of
location.

§ 572.2   Definitions.

top

(a) Act means the National Flood Insurance Act of 1968, as
amended (42 U.S.C. 4001–4129).

(b) Savings association means, for purposes of this part, a
savings association as that term is defined in 12 U.S.C. 1813(b)(1) and
any subsidiaries or service corporations thereof.

(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.

(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.

§ 572.3   Requirement to purchase flood insurance
where available.

top

(a) In general. A savings association 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 savings association that acquires a
loan from a mortgage broker or other entity through table funding shall be
considered to be making a loan for the purposes of this part.

§ 572.4   Exemptions.

top

The flood insurance requirement prescribed by §572.3 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.

§ 572.5   Escrow requirement.

top

If a savings association 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 savings association
shall also require the escrow of all premiums and fees for any flood
insurance required under §572.3. The savings association, or a servicer
acting on behalf of the savings association, 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 premiums are due, the savings
association, or a servicer acting on behalf of the savings association,
shall pay the amount owed to the insurance provider from the escrow
account by the date when such premiums are due.

§ 572.6   Required use of standard flood hazard
determination form.

top

(a) Use of form. A savings association 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 savings association may obtain the standard flood
hazard determination form from FEMA, P.O. Box 2012, Jessup, MD
20794–2012.

(b) Retention of form. A savings association 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 savings association
owns the loan.

[61 FR 45709, Aug. 29, 1996, as amended at 64 FR 69185, Dec. 10,
1999]

§ 572.7   Forced placement of flood
insurance.

top

If a savings association, or a servicer acting on behalf of the savings
association, 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 §572.3, then
the savings association 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 §572.3, for the
remaining term of the loan. If the borrower fails to obtain flood
insurance within 45 days after notification, then the savings association
or its servicer shall purchase insurance on the borrower's behalf. The
savings association or its servicer may charge the borrower for the cost
of premiums and fees incurred in purchasing the insurance.

§ 572.8   Determination fees.

top

(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 savings association, or a servicer acting on behalf of the
savings association, 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

(4) Results in the purchase of flood insurance coverage by the lender
or its servicer on behalf of the borrower under §572.7.

(c) Purchaser or transferee 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.

§ 572.9   Notice of special flood hazards and
availability of Federal disaster relief assistance.

top

(a) Notice requirement. When a savings association 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 savings
association 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 savings association 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 savings association provides
notice to the borrower and in any event no later than the savings
association 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 savings association shall retain a
record of the receipt of the notices by the borrower and the servicer for
the period of time the savings association owns the loan.

(e) Alternate method of notice. Instead of providing the notice
to the borrower required by paragraph (a) of this section, a savings
association 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 savings association shall retain a record of the
written assurance from the seller or lessor for the period of time the
savings association owns the loan.

(f) Use of prescribed form of notice. A savings association 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.

§ 572.10   Notice of servicer's
identity.

top

(a) Notice requirement. When a savings association 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 savings association shall notify the Director of FEMA (or the
Director'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 savings association's notice of the servicer's identity. This
notice may be provided electronically if electronic transmission is
satisfactory to the Director of FEMA's designee.

(b) Transfer of servicing rights. The savings association shall
notify the Director of FEMA (or the Director'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.

Appendix A to Part 572—Sample Form of Notice of Special Flood Hazards
and Availability of Federal Disaster Relief Assistance

top

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.

Browse
Previous | Browse
Next

For questions or comments regarding e-CFR
editorial content, features, or design, email [email-masked].

For questions
concerning e-CFR programming and delivery issues, email [email-masked].

Section
508 / Accessibility