Short answer: if a home securing a loan from a federally regulated lender or a federal agency lender is in a special flood hazard area mapped by FEMA, and flood insurance is available there, the loan must carry flood insurance for its term. The coverage must be at least the lesser of the loan’s principal balance or the maximum available for that type of property. The lender must tell you in writing before closing, generally must escrow the premiums, and must buy the insurance for you if you do not get it within 45 days after a notice. This page covers federal law only; other rules may apply where you live. It is general information, not legal or financial advice.
Who the requirement covers
Federal law tells each federal lending regulator to bar the lenders it supervises from making, increasing, extending or renewing a loan secured by improved real estate or a mobile home in an area FEMA has identified as having special flood hazards, where flood insurance is available, unless the building and any personal property securing the loan are covered for the term of the loan (42 U.S.C. 4012a(b)(1)(A), LII, read October 30, 2026). Federal agency lenders are bound the same way (4012a(b)(2)). The lenders must accept private flood insurance that meets the coverage requirement (4012a(b)(1)(B)).
Each regulator has its own, nearly identical rule. For example, the rule for institutions the FDIC supervises is 12 CFR part 339 (eCFR, text up to date as of October 28, 2026, read October 30, 2026); parallel rules are at 12 CFR part 22, 12 CFR 208.25 and 12 CFR part 760. The section numbers below are from part 339. You can look up the flood map for an address at the FEMA Flood Map Service Center.
How much coverage
The amount must be at least the lesser of the outstanding principal balance or the maximum coverage available for that type of property, and it covers the building and personal property securing the loan, not the land (12 CFR 339.3(a)). Under the National Flood Insurance Program, the maximum building coverage for a single-family or two-to-four family building is $250,000 (44 CFR 61.6, eCFR).
This example is only for the math, with example balances, not figures for any loan.
| Item | Example A | Example B |
|---|---|---|
| Outstanding principal balance | $300,000 | $180,000 |
| Maximum building coverage (single-family) | $250,000 | $250,000 |
| Minimum required: the lesser of the two | $250,000 | $180,000 |
If the lender asks for more than this minimum, ask what in the loan contract requires it.
The notice before closing
When the loan is made, increased, extended or renewed, the lender must mail or deliver a written notice to you within a reasonable time before the transaction is completed, whether or not flood insurance is available there. It must warn that the building is or will be in a special flood hazard area, describe the purchase requirement, say that coverage may be available through the National Flood Insurance Program or private insurers, and encourage you to compare policies (12 CFR 339.9(a)-(c)). For program details, see FloodSmart.
Escrow of flood premiums
For a residential loan made, increased, extended or renewed on or after January 1, 2016, the lender or servicer generally must escrow all flood premiums and fees, paid on the same schedule as your loan payments, for the life of the loan (12 CFR 339.5(a)(1); 42 U.S.C. 4012a(d)). The exceptions include business, commercial or agricultural loans; a junior lien when the first lien already has the required coverage; coverage paid by a condominium, cooperative or homeowners association for the whole project; home equity lines of credit; loans 90 or more days past due; and loans with a term of 12 months or less (339.5(a)(2)). Certain smaller lenders are also exempt (339.5(c)). For how an escrow shortage works, see mortgage escrow account shortage.
If coverage lapses or is too low
If the lender or servicer finds at any time that the property is not covered or is underinsured, it must notify you to get coverage at your expense. If you do not get it within 45 days after the notice, it must buy the insurance for you and may charge you the premiums and fees, including for the period back to when coverage lapsed (12 CFR 339.7(a); 42 U.S.C. 4012a(e)(1)-(2)). Within 30 days after it receives confirmation of your own coverage, it must cancel the policy it bought and refund premiums and related fees for any time both policies overlapped (339.7(b); 4012a(e)(3)).
As an example only, with example dates: a notice sent March 1, 2027 gives you until April 15, 2027, 45 days later, before the lender must buy the insurance.
The Regulation X rules on force-placed hazard insurance do not apply to flood insurance required by the Flood Disaster Protection Act (12 CFR 1024.37(a)(2)(i), eCFR); the flood rules above govern it instead. For force-placed hazard insurance, see force-placed insurance on a mortgage.
After a flood
For help paying for damage, see disaster expenses: FEMA aid vs a personal loan. You can submit a complaint about a lender or servicer at consumerfinance.gov/complaint. For your own case, ask a lawyer; you can look for legal aid through the Legal Services Corporation.
Questions to ask the lender or insurer
- Is the home in a special flood hazard area on the current FEMA map, and which map panel did you use?
- What coverage amount do you require, and how did you get that figure?
- Will you accept a private flood policy, and what must it say?
- Will the flood premium be escrowed, or does an exception apply?
- If coverage lapses, where should I send proof of my own policy?
Checklist
- Read the special flood hazard notice before closing.
- Minimum coverage: the lesser of the principal balance or the maximum available.
- Expect flood premiums in escrow unless an exception applies.
- Act within 45 days of a lapse notice to avoid lender-placed coverage.
- Send proof of coverage; overlapping lender-placed premiums must be refunded.
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Sources
- Cornell LII: 42 U.S. Code 4012a, Flood insurance purchase and compliance requirements and escrow accounts
- eCFR: 12 CFR Part 339, Loans in Areas Having Special Flood Hazards, current text up to date as of October 28, 2026
- eCFR: 44 CFR 61.6, Maximum amounts of coverage available (National Flood Insurance Program), current text up to date as of October 28, 2026
- eCFR: 12 CFR 1024.37, Force-placed insurance (Regulation X), current text up to date as of October 28, 2026
- FEMA: Flood Map Service Center
- FEMA: FloodSmart, the National Flood Insurance Program
- CFPB: Submit a complaint
- Legal Services Corporation: Find legal aid
Disclosure: Modern Lending Solutions is not a lender, loan broker or agent for any lender or loan broker, and does not make credit decisions. Any compensation we receive is paid by participating lenders, only for advertising services. This guide is general information, not financial or legal advice.