QMy bank has a flood zone discrepancy between the flood certification and
the flood policy provided by the insurance
agent. The loan is secured with collateral
located in flood “zone AE” according to
the flood certification. The insurance agent
received the flood certification but wrote
the policy for “zone X” and refuses to
change the zone on the flood policy to AE.
This policy is not subject to the Grandfather Rule which provides
a lower-cost flood insurance option for property owners who meet
certain conditions when flood zones change. What should the bank do
to resolve this discrepancy?
AThe bank should investigate the discrepancy and advise the insurance company to resolve the discrepancy. If the insurance agency declines
to resolve the dispute or fails to cooperate, lenders should notify the insurance agent about the insurer’s duty, pursuant to FEMA’s letter of April
16, 2008 (W-08021) http://bsa.nfipstat.fema.gov/wyobull/2008/w-08021.
pdf, to write a flood insurance policy that covers the most hazardous
Question and Answer 71 of the Interagency Q&As address what lenders should do in the event of discrepancies ( https://www.gpo.gov/fdsys/
pkg/FR-2009-07-21/pdf/E9-17129.pdf ). They explain that lenders must
be concerned about a discrepancy in the zone designation on the Standard Flood Hazard Determination Form (the SFHDF) and the one on the
flood insurance policy when the discrepancy is between a high-risk zone
(A or V) and a low-or moderate-risk zone (B, C, D, or X). This appears to
be the case here.
The Q&A requires lenders to compare the zones on the policies they
receive with those on the SFHD and, if the insurance policy shows a lower
risk zone than the SFHDF, to investigate.
If the “Grandfather Rule” you mentioned does not apply, lenders
should determine whether the difference in flood zone designations is the
result of a mistake. If not a mistake, a lender and borrower may jointly
request that FEMA review the determination to confirm or review the accuracy of the original determination if certain conditions are met.
If, despite these efforts, the discrepancy is not resolved, or in the course
of attempting to resolve a discrepancy, a borrower or an insurance company or its agent is uncooperative in assisting a lender in this attempt, the
lender should notify the insurance agent about the insurer’s duty, pursuant
to FEMA’s letter of April 16, 2008 (W-08021) http://bsa.nfipstat.fema.gov/
wyobull/2008/w-08021.pdf, “to write a flood insurance policy that covers the most hazardous flood zone.” The lender should include its zone
information and notify the insurance company itself. The lender should
substantiate these communications in its loan file. (Response provided
And while we are on the topic…….
QAn external auditor found that the bank has a potential flood violation
due to flood policies with differing flood
zones and risk zones. For example,
the flood zone on the bank’s flood
determination is AE, but the risk zone on
the flood insurance policy is X. Where can I
find a list of current flood zones in order to
resolve this discrepancy?
ATo find a list of current flood zones, start with FEMA’s Map Service Center ‘Search by Address” site ( https://msc.fema.gov/portal/search).
It will allow you to overlay the current flood zones over a map and see
if a specific property or building is or is not located in a Standard Flood
Hazard Area (SFHA.) It will let you print out a copy of a FIRMette, which
is basically a flood map focused on the specific property/area. That in
turn can be provided to the insurance agent or FEMA for clarification.
(Response provided 3/2019)
QIs a physician who prescribes marijuana for medicinal use considered to be a marijuana-related business (MRB)?
AFinCEN has taken the informal approach that a MRB is a business that touches the plant. The Small Business Administration (SBA) has
a more expansive definition but that only comes into play if there are SBA
The Controlled Substances Act criminalizes possession or distribution.
That wouldn’t apply to a doctor unless the doctor also dispenses the drug.
However, doctors also have to have a special authorization to prescribe
marijuana. But they’re generally not MRBs. (Response provided 3/2019.) ■
ABOUT THE AUTHORS
LESLIE CALLAWAY, CRCM,
CAMS, CAFP, Director of
Compliance Outreach and
Development, along with
Senior Compliance Analysts
MARK KRUHM, CRCM, CAFP, and RHONDA CASTANEDA, CRCM, serve as a
compliance resource for ABA member banks. Among other managerial duties,
the team is responsible for manning ABA’s Compliance Hotline, serving on
compliance committees, and providing content and guidance for ABA courses.
Have a question? Email email@example.com or call (800) 551-2572.
Answers do not provide, nor are they substitutes for, professional legal advice.
BY LESLIE CALLAWAY, CRCM, CAMS, CAFP, MARK KRUHM, CRCM, CAFP,
AND RHONDA CASTANEDA, CRCM