FCRA END TERM EXAM QUESTIONS AND
100% VERIFIED ANSWERS
require you to perform a flood determination
the requirement to perform a flood determination applies to loans that are or will be secured by a
building or mobile home attached to real property.
Ex. A loan to purchase a vacation home that will be secured by that home
Your bank is making a designated loan and you have been assigned the task of calculating
the insurable value to recommend the amount of flood insurance to require. Which method
below is acceptable when calculating the amount of insurance to require when establishing
the insurable value?
A. You may use an appraisal based on a market-value approach
B. You may use the exact amount of the insurable value used in the hazard insurance
policy
C. You may use a construction-cost calculation approach
D. You may use the replacement cost value including the value of the land
The correct answer is c. A is incorrect because you may use an appraisal based on a cost-value,
not market-value approach. B is incorrect because the insurable value for flood insurance
purposes may differ from the coverage provided by the hazard insurance and adjustments may be
necessary to include, for example, foundation coverage not normally provided for under a hazard
insurance policy. D is incorrect because the replacement cost value for flood insurance purposes
excludes the land.
Which provision below meets part of the statutory definition of a private flood insurance
policy?
A. Provision that the insurance company is licensed in the state where the insurance
company is located
B. Provision that the deductibles are higher than under the NFIP
C. Provision that the insured will be given written notice 90 days before cancellation of
flood insurance coverage
D. Provision that coverage conditions are not narrower than coverage provided in a SFIP
,The correct answer is d. D is correct. A is incorrect because the insurance company must be
licensed, admitted, or otherwise approved to engage in the business of insurance by the insurance
regulator of the state or jurisdiction in which the property to be insured is located, not the state
where the insurance company is located. B is incorrect because the deductibles may not be
higher than the specified maximum. C is incorrect because the insured and the lender must be
given 45 days written notice before cancellation or non-renewal of flood insurance.
Ms. Franklin has applied for a loan secured by her new primary residence on a beautiful
Florida beach which puts her home in a designed flood zone. The insurable value of the
primary residence is $300,000 and the amount of the loan will be $285,000. What is the
minimum amount of flood insurance that your bank must require to consummate the
transaction?
A. $300,000
B. $285,000
C. $250,000
D. $200,000
The correct answer is c. A, B, and D are incorrect because the minimum flood insurance amount
required is the lesser of the outstanding principal balance of the loan, the insurable value, or the
maximum amount of coverage available under the NFIP for the particular type of building.
What is the purpose of the Flood Insurance Program (NFIP)?
his program makes flood insurance
available to flood-prone areas at a reasonable cost through a joint program involving the private
insurance industry and the federal government.
What does the NFIP cover?
The NFIP provides up to a predetermined amount of fed subsidized flood insurance to owners of
improved real estate located in designated flood hazard areas within participating communities.
The community can choose to participate in the NFIP. If the community participates, then flood
insurance will be available to property owners in that community. The FDPA applies to all
federally-regulated lending institutions and includes all banks. The FDPA covers any designated
,loan, defined as 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 NFIP.
The FDPA requires banks to take the following actions:
Determine whether the building or mobile home securing a consumer or commercial loan
is in a high-risk flood zone
Notify the borrower if flood insurance is available under the NFIP and whether it will be
required
If flood insurance is available, the FDPA requires the bank to do the following tasks:
Obtain proof of insurance prior to closing the loan
Ensure an adequate amount of insurance remains in force for the life of the loan
What types of structures are eligible for coverage under NFIP?
- Residential, industrial, commercial, and agricultural buildings that are walled and roofed
structures that are principally above ground
- Buildings under construction where a development loan is made to construct insurable
improvements on the land (insurance can be purchased to keep pace with the new construction)
- Mobile homes that are affixed to a permanent site, including mobile homes that are part of a
dealer's inventory and affixed to permanent foundations
- Condominiums
- Co-operative and apartment buildings
- Flood insurance coverage is also available for personal property and other insurable contents
contained in real property or mobile homes located in special flood hazard areas (the property
must be insured in order for the contents to be eligible)
- Nursing homes and assisted living facilities
- Dormitories
- Grain bins, silos, or other farm buildings
What types of structures are NOT covered under NFIP
- Unimproved land, bridges, dams and roads
- Mobile homes not affixed to a permanent site
, - Travel trailers and campers
- Converted buses or vans
- Buildings entirely in, on, or over water into which boats are floated
- Pole Barns (unless they qualify as buildings)
What is the mandatory purchase requirement?
Means that before a bank can make, increase, renew or extend (some bankers use the acronym
"MIRE"—often referred to as a MIRE event—to remember these four triggers for flood
insurance coverage) any loan secured by certain improved real estate (including mobile homes)
the bank must perform the following tasks:
1. Determine whether the building or mobile home property is located in a special flood hazard
area (SFHA) in a community that participates in the NFIP
2. Notify the property owner of this fact and of the owner's obligation to purchase flood
insurance
3. Ensure that sufficient flood insurance is maintained throughout the life of the loan
Standard Flood Hazard Determination Form (SFHDF)
Lenders are required to use this form when determining whether a building or mobile home
offered as collateral security for any federally regulated or insured loan is or will be located in a
special flood hazard area in which flood insurance is available. The Standard Flood Hazard
Determination Form may be used in a printed, computerized, or electronic manner.
When does the bank need to make a flood determination?
The bank must make a flood determination anytime it makes, increases, renews, or extends a
loan that is secured or to be secured by improved real property. This process involves providing
the property description to a person or vendor that has current flood maps published by the NFIP.
The FDPA requires the person or vendor the bank relies upon to perform this task to guarantee
the accuracy of the information it provides the bank.
When can a lender rely on a previous determination?
100% VERIFIED ANSWERS
require you to perform a flood determination
the requirement to perform a flood determination applies to loans that are or will be secured by a
building or mobile home attached to real property.
Ex. A loan to purchase a vacation home that will be secured by that home
Your bank is making a designated loan and you have been assigned the task of calculating
the insurable value to recommend the amount of flood insurance to require. Which method
below is acceptable when calculating the amount of insurance to require when establishing
the insurable value?
A. You may use an appraisal based on a market-value approach
B. You may use the exact amount of the insurable value used in the hazard insurance
policy
C. You may use a construction-cost calculation approach
D. You may use the replacement cost value including the value of the land
The correct answer is c. A is incorrect because you may use an appraisal based on a cost-value,
not market-value approach. B is incorrect because the insurable value for flood insurance
purposes may differ from the coverage provided by the hazard insurance and adjustments may be
necessary to include, for example, foundation coverage not normally provided for under a hazard
insurance policy. D is incorrect because the replacement cost value for flood insurance purposes
excludes the land.
Which provision below meets part of the statutory definition of a private flood insurance
policy?
A. Provision that the insurance company is licensed in the state where the insurance
company is located
B. Provision that the deductibles are higher than under the NFIP
C. Provision that the insured will be given written notice 90 days before cancellation of
flood insurance coverage
D. Provision that coverage conditions are not narrower than coverage provided in a SFIP
,The correct answer is d. D is correct. A is incorrect because the insurance company must be
licensed, admitted, or otherwise approved to engage in the business of insurance by the insurance
regulator of the state or jurisdiction in which the property to be insured is located, not the state
where the insurance company is located. B is incorrect because the deductibles may not be
higher than the specified maximum. C is incorrect because the insured and the lender must be
given 45 days written notice before cancellation or non-renewal of flood insurance.
Ms. Franklin has applied for a loan secured by her new primary residence on a beautiful
Florida beach which puts her home in a designed flood zone. The insurable value of the
primary residence is $300,000 and the amount of the loan will be $285,000. What is the
minimum amount of flood insurance that your bank must require to consummate the
transaction?
A. $300,000
B. $285,000
C. $250,000
D. $200,000
The correct answer is c. A, B, and D are incorrect because the minimum flood insurance amount
required is the lesser of the outstanding principal balance of the loan, the insurable value, or the
maximum amount of coverage available under the NFIP for the particular type of building.
What is the purpose of the Flood Insurance Program (NFIP)?
his program makes flood insurance
available to flood-prone areas at a reasonable cost through a joint program involving the private
insurance industry and the federal government.
What does the NFIP cover?
The NFIP provides up to a predetermined amount of fed subsidized flood insurance to owners of
improved real estate located in designated flood hazard areas within participating communities.
The community can choose to participate in the NFIP. If the community participates, then flood
insurance will be available to property owners in that community. The FDPA applies to all
federally-regulated lending institutions and includes all banks. The FDPA covers any designated
,loan, defined as 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 NFIP.
The FDPA requires banks to take the following actions:
Determine whether the building or mobile home securing a consumer or commercial loan
is in a high-risk flood zone
Notify the borrower if flood insurance is available under the NFIP and whether it will be
required
If flood insurance is available, the FDPA requires the bank to do the following tasks:
Obtain proof of insurance prior to closing the loan
Ensure an adequate amount of insurance remains in force for the life of the loan
What types of structures are eligible for coverage under NFIP?
- Residential, industrial, commercial, and agricultural buildings that are walled and roofed
structures that are principally above ground
- Buildings under construction where a development loan is made to construct insurable
improvements on the land (insurance can be purchased to keep pace with the new construction)
- Mobile homes that are affixed to a permanent site, including mobile homes that are part of a
dealer's inventory and affixed to permanent foundations
- Condominiums
- Co-operative and apartment buildings
- Flood insurance coverage is also available for personal property and other insurable contents
contained in real property or mobile homes located in special flood hazard areas (the property
must be insured in order for the contents to be eligible)
- Nursing homes and assisted living facilities
- Dormitories
- Grain bins, silos, or other farm buildings
What types of structures are NOT covered under NFIP
- Unimproved land, bridges, dams and roads
- Mobile homes not affixed to a permanent site
, - Travel trailers and campers
- Converted buses or vans
- Buildings entirely in, on, or over water into which boats are floated
- Pole Barns (unless they qualify as buildings)
What is the mandatory purchase requirement?
Means that before a bank can make, increase, renew or extend (some bankers use the acronym
"MIRE"—often referred to as a MIRE event—to remember these four triggers for flood
insurance coverage) any loan secured by certain improved real estate (including mobile homes)
the bank must perform the following tasks:
1. Determine whether the building or mobile home property is located in a special flood hazard
area (SFHA) in a community that participates in the NFIP
2. Notify the property owner of this fact and of the owner's obligation to purchase flood
insurance
3. Ensure that sufficient flood insurance is maintained throughout the life of the loan
Standard Flood Hazard Determination Form (SFHDF)
Lenders are required to use this form when determining whether a building or mobile home
offered as collateral security for any federally regulated or insured loan is or will be located in a
special flood hazard area in which flood insurance is available. The Standard Flood Hazard
Determination Form may be used in a printed, computerized, or electronic manner.
When does the bank need to make a flood determination?
The bank must make a flood determination anytime it makes, increases, renews, or extends a
loan that is secured or to be secured by improved real property. This process involves providing
the property description to a person or vendor that has current flood maps published by the NFIP.
The FDPA requires the person or vendor the bank relies upon to perform this task to guarantee
the accuracy of the information it provides the bank.
When can a lender rely on a previous determination?
