Finance
A Pennsylvania borrower applies for a mortgage on a property in a FEMA-designated Special Flood Hazard Area (SFHA). The lender must:
ADeny the loan automatically
BRequire the borrower to purchase flood insurance as a condition of the loan✓ Correct
CNotify FEMA to reassess the property's flood zone classification
DCharge a higher interest rate but no other requirement applies
Explanation
Federal law (the National Flood Insurance Reform Act) requires federally regulated lenders to require flood insurance on any loan secured by property in a FEMA-designated SFHA. The lender must notify the borrower, and the borrower must maintain flood insurance for the life of the loan.
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