I received a letter from my bank stating I am required to have flood insurance for my property and the amount of the policy I presently have is not sufficient. The letter stated that the bank intends to force place a policy if I do not provide proof of sufficient coverage. Can the bank do that?

Yes. A national bank or federal savings association (collectively, bank), or the servicer acting on behalf of the bank, is required by law to force place flood insurance, if all of the following circumstances occur:

  • The bank determines at any time during the life of the loan that a building or mobile home securing the loan is located in a Special Flood Hazard Area;
  • Flood insurance is available under the National Flood Insurance Act (Act);
  • The bank determines that flood insurance coverage is inadequate or does not exist; and
  • Within 45 days after the bank provides a required notice, the borrower fails to purchase the appropriate amount of coverage.

The bank, or servicer acting on behalf of the bank, is required to send notice to the borrower when it determines that flood insurance is required and the property is either not insured, or the amount of flood insurance on the property is not adequate.  The notice to the borrower must state that the borrower should obtain, at the borrower’s expense, flood insurance in an amount at least equal to the amount required under the Act, for the remainder of the loan’s term.  If the borrower does not obtain sufficient insurance within 45 days, the bank or servicer must purchase the insurance on the borrower’s behalf, and the bank or servicer may charge the borrower for the cost of premiums and fees to obtain the coverage.

September 2019