The mandatory purchase of flood insurance is tied to the location of the improvements on the property and not the property itself. If no portion of the building or mobile home is located within the “zone”, the flood insurance requirements do not apply.
If property securing an extension of credit is located in a participating community, the Bank must notify the purchaser that flood insurance is required. Money cannot be advanced by the Bank until evidence of insurance coverage is obtained.
If property is located in a flood hazard area but the community is not participating in the National Flood Insurance Program, the Bank may extend a loan provided that notice is given to borrower that the property is in a flood hazard area. The Bank is not required to cause the borrower to obtain flood insurance, but the Bank may require the borrower to obtain private flood insurance to protect its collateral.