MADISON, Wis. (5/23/13)--With a wet U.S. spring causing the potential for flooding to increase, all credit unions need to make sure they know whether a property is in a flood zone before approving a mortgage, according to an article by Kriss Besch, CUNA Mutual Group product support manager.
"It's been the rule for decades," Besch wrote. "All lenders have to determine whether a property is in a flood zone before approving a mortgage. That lender also has to make sure that properties in flood zones are covered by insurance."
However, because of changing flood zones, "a mortgaged property that did not need flood insurance at the time of loan origination might need it five years later," Besch added. "It's up to lenders to keep track of map revisions and any other Federal Emergency Management Agency (FEMA) changes regarding exclusions or exceptions."
The Biggert-Waters Flood Insurance Report Act has increased its penalty to a minimum of $2,000 from $350 per flood violation, and lifted its annual $10,000 cap after several years of record flooding, catastrophic hurricanes and historic super storms.
"That means that a credit union that does not monitor flood zone revisions and require its members to have flood insurance could find itself in hot water--and with a big bill due to the government," Besch added.
Among additional tips for credit unions that Besch offers in the article on CUNA Mutual's website: