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Financial Services Law Insights and Observations

Eleventh Circuit Holds Lender Can Require Increased Flood Insurance Coverage

FHA Flood Insurance


For the second time in less than five months, a U.S. Court of Appeals ruled that the FHA Model Mortgage sets a floor, not a ceiling, on the amount of flood insurance coverage a borrower must maintain. Feaz v. Wells Fargo Bank, N.A., No. 13-10230, 2014 WL 503149 (11th Cir. Feb. 10, 2014); see also Kolbe v. BAC Home Loans Servicing, LP, 738 F.3d 432 (1st Cir. Sept. 2013). On February 10, the U.S. Court of Appeals for the Eleventh Circuit upheld a district court’s dismissal of a borrower’s claim for breach of contract and violations of various other state laws, concluding that the FHA Model Mortgage “unambiguously makes the federally required flood-insurance amount the minimum, not the maximum, the borrower must have.” Thus, the court concluded that the lender did not violate the mortgage when it required the borrower to increase her flood insurance coverage from the minimum amount required by federal law to the replacement cost value of her home or the maximum available under the National Flood Insurance Program, whichever was less. In reaching its decision, the court sided with the United States, which filed an amicus brief in this case and in a First Circuit case decided in September 2013, reasoning, in part, that any other interpretation would undermine federal housing policy.