BACKGROUND

INTRODUCTION

The Wisconsin Bankers Association (WBA) has prepared this toolkit to help senior management, commercial lenders, loan processors, compliance officers, and others involved when loans are secured by improved real estate or mobile homes located in special flood hazard areas (SFHA). This toolkit is divided into five sections. The sections are designed to be read and understood together, in order to provide a comprehensive understanding of the flood rules, more nuanced and misunderstood aspects of the rules, as well as well as to provide some tools and resources to aid with compliance and overall loan operations.

Section 1 includes a summary of the flood rules which consolidates each of the agency’s rulemakings into a single outline. Embedded within the outline of the rule are notes, which provide additional comments, helpful instruction, and rationale from WBA and other sources, designed to assist in understand the rule, provide additional guidance, as well as bank policy considerations. A sample SFHA notice and escrow clause is included. Users of this toolkit should consult the rules written by their prudential regulator and consider that the flood rules are amended from time to time, to which links are provided in Section 5.

Section 2 includes a discussion on cross-collateralization language as it relates to flood matters. Because flood rules are dependent upon whether collateral is within a special flood hazard area, cross-collateralization clauses can have significant impact on flood considerations. This Section is designed to address those implications.

Section 3 includes several tools. This section provides summaries of various important aspects of the rule such as a coverage flow chart and checklists. This section has been designed to encompass the most commonly considered aspects of the flood rule and provided in ways which can be utilized and understood by various staff of banking institutions. This section is best utilized with an understanding of the rule, as provided in Section 1.

Section 4 includes selected questions and answers from the interagency flood Q&As. This section is designed to cover unique scenarios, and nuanced aspects of the rules, which are not directly addressed elsewhere in this toolkit. Furthermore, the questions have been selected to shed light on matters not covered, often overlooked, or misunderstood aspects of the rules as presented in Section 1.

Section 5 provides links to additional resources.

A flood insurance amount calculator is included as an additional resource, separate from this document. The calculator is provided as a Microsoft Excel Spreadsheet and includes instructions within.

Word document versions of each checklist are also available alongside this toolkit.