Flood insurance confusion cleared.

Q. Is there ever a circumstance when flood insurance may be waived on a property in a flood zone, such as if that property is taken as an "abundance of caution"? What about if the property is expected to sell within 30 days and the insurance was in peace but has lapsed? Or are we still required

A. According to the flood regulations, in general, if a property is located in a flood zone, "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." No except-ions are created for loans made under an "abundance of caution." The only exceptions under the act are for those loans where the property securing the loan had an original principal balance of $5,000 or less and a repayment term of one year or less.

The requirement to force-place insurance applies if 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 ..." If your bank still holds the property, and the insurance has lapsed, the property owner has 45 days from the expiration of the old flood insurance to obtain new coverage. If the property sells within that time period, it is probably a moot point, but you still need to demonstrate good faith compliance with the flood insurance requirements. If the property doesn't sell and you are still holding title after 45 days, placement is mandatory.

To submit questions, send an e-mail to compliance@aba.com. Please include bank name, phone number, and address.