HFIAA Flood Disclosure and Insurance Reminder

U.S. Bank Home Mortgage
Third Party Lending Operations
Lender Operations Update
2015-012
Attn: HFA Lenders
HFIAA Flood Disclosure and Insurance Reminders
News
Purpose
Reminder
Alert
March 26, 2015
Training
This Lender Operations Update covers two topics:
1. A new Homeowner Flood Insurance Affordability Act (HFIAA) disclosure required for
non-residential detached structures
2. Reminders for flood insurance on non-residential detached structures
Flood Disclosure Requirements for Non-Residential Structures
Overview
These changes relate to the new HFIAA flood insurance disclosure requirement for
non-residential detached structures.
Details
The Homeowner Flood Insurance Affordability Act section 13(b) details an amendment to
the Home Buying Information Booklet provided by the CFPB. This amendment provides
specific guidance to the borrower regarding obtaining flood insurance, even if the lender
does not require it.
At this time, USBHM will send the HFIAA non-residential detached structures disclosure
directly to the borrower on all conventional FHLMC or FNMA loans where the property is
identified to be in a special flood hazard area.
We will be reevaluating our requirements regarding this disclosure as soon as the CFPB
regulations are finalized.
Attachment
For your reference, a sample disclosure is attached.
Non-Residential Detached Structures Disclosure
Page 1 of 2
This document is not a Consumer Credit Advertisement and is intended for Correspondent and Wholesale Client Use Only. This information is provided to assist Correspondents and Wholesale
Clients and is not a consumer credit advertisement as defined by Regulation Z. Loans are subject to normal credit qualification and program guidelines. Not all loan programs are available in all
states for all loan amounts. Interest rates and program terms are subject to change without notice. Visit usbank.com to learn more about U.S. Bank products and services. Mortgage products
offered by U.S. Bank National Association. Deposit products offered by U.S. Bank National Association, Member FDIC. ©2015 U.S. Bank
Flood Insurance Reminders
Overview
These reminders relate to flood coverage requirements for detached structures.
Guidance for
Multiple
Structures –
Conventional
Agency Loans
With Lender Operations Update 2015-006, all conventional loans closing under FHLMC or
FNMA loan programs, flood coverage is not required on non-residential detached structures.
To be defined as residential, if any part of the detached structure is designed to contain
sleeping, bathroom and kitchen facilities, flood insurance coverage would be required. For
example, flood coverage would not be required for a shed or workshop. However, if the
property has a separate residential structure such as guest house, flood coverage for that
structure is required.
Guidance for
Multiple
Structures –
Government
and Portfolio
Loans
Until USBHM receives further direction from the regulatory agencies or investor guidelines,
for portfolio loans and government loans (FHA, VA, or USDA), we will require flood
insurance coverage on all detached structures located in a SFHA where the replacement
cost value of the detached structure is more than $1,000. Detached structures that are
permanently affixed to a foundation (as documented by an appraiser or hazard insurance
agent) and valued at less than $1,000, do not require flood coverage.
Note: A value of $0.00 is not allowed. If the appraisal does not provide the replacement cost
value for a detached structure, please request an update from the appraiser to provide the
replacement cost value for the structure.
For detached structures, a National Flood Insurance Program (NFIP) policy covers only one
structure per policy. An exception is detached garages, used for storage or parking, which
are typically included in the NFIP policy for the primary residence. Therefore, if there are
additional structures with a replacement cost value exceeding $1,000 and insurance is
provided by a NFIP policy, we require an individual NFIP policy for each additional structure.
If private flood insurance is obtained, the policy should include a list of all structures covered
and indicate the amount of coverage provided for each structure.
Guidance for
Simultaneous
Second Liens
If the property is closing under a FNMA or FHLMC product but is also secured by a USBHM
simultaneous second lien portfolio loan, (a HELOC or a closed-end second), all structures
on the property (including non-residential detached structures) must have flood coverage.
If you have any questions regarding this information, please contact the HFA Hotline at 800-562-5165,
option #2.
We appreciate your continued partnership.
Page 2 of 2
This document is not a Consumer Credit Advertisement and is intended for Correspondent and Wholesale Client Use Only. This information is provided to assist Correspondents and Wholesale
Clients and is not a consumer credit advertisement as defined by Regulation Z. Loans are subject to normal credit qualification and program guidelines. Not all loan programs are available in all
states for all loan amounts. Interest rates and program terms are subject to change without notice. Visit usbank.com to learn more about U.S. Bank products and services. Mortgage products
offered by U.S. Bank National Association. Deposit products offered by U.S. Bank National Association, Member FDIC. ©2015 U.S. Bank