In one sentence
A certification of the property's FEMA flood zone that triggers mandatory flood insurance when any structure sits in a special flood hazard area.
The longer version
Federal law requires regulated lenders to obtain a determination on every loan secured by improved real estate, usually with life-of-loan monitoring so zone changes surface later. A structure in an A or V zone means flood insurance in required amounts before closing.
The determination is cheap and instant; the insurance it can trigger is not. Finding a flood issue late is an avoidable closing delay, so this line runs at kickoff.
Common questions
- What is a flood determination?
- A standard certification of whether a property sits in a FEMA special flood hazard area. Federally regulated lenders must obtain it for loans secured by improved real estate.
- When is flood insurance required on a commercial loan?
- When a building securing a loan from a federally regulated lender is in a special flood hazard area. Coverage requirements follow federal rules, and the lender must notify the borrower before closing.
- Who orders the flood determination?
- The lender, usually through a flood determination vendor, early in the process so any required insurance can be bound before closing.
Keep reading
- The CRE due diligence checklistEvery phase of diligence, organized the way deals close.
- The commercial loan closing checklistWhat goes on the list and who owns each line.
- The commercial loan closing timelineThe stages and what sets the pace.
- Due diligence softwareThe request list, the owners and the dates in one place.