Loans in Special Flood Hazard Areas

FEMA has identified some areas in the U.S. as having special flood, mudflow, or flood related erosion hazards. These SFHAs have a high risk of flooding with corresponding property damage during any 30-year period. As a result, lenders require flood insurance when collateral is located in a SFHA. Most flood insurance is purchased through the government-operated NFIP.

NCUA regulation part 760, Loans in Areas Having Special Flood Hazards, implements the requirements of theFlood Act, and the Flood Disaster Protection Act of 1973, as amended, for insured credit unions. According to NCUA regulation § 760.3, Requirements to purchase flood insurance where available, a credit union 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 life of the loan. Officials and management may not waive or grant exceptions to the requirements to obtain and retain flood insurance.

Structures that are part of the residential property but detached from the primary residential structure (and do not serve as a residence) are exempted from the insurance requirement. These may include structures such as garages, sheds, workshops, or barns, as long as those structures are used mainly for personal, family, or household purposes and are not used primarily for agricultural, commercial, industrial, or other business purposes.

Designated loan means a loan secured by a building or mobile home that is located or to be located in a SFHA in which flood insurance is available under the Flood Act and the SFlood Disaster Protection Act of 1973.

The following topics address the details of SFHA loans:

• Limits

• Requirements

• Appeals

• Exemptions

• Non-participating Communities

Last updated on December 01, 2022