What is the minimum amount of flood insurance coverage that must be required by the lending institution to be in compliance with the mandatory purchase provision?
For loans secured by improved real estate located in a Special Flood Hazard Area, lending institutions must require flood insurance in an amount at least equal to the outstanding principal balance of the loan up to the maximum limit of coverage available. Flood insurance coverage is limited to the value of the building; therefore, when calculating the minimum coverage, the lender should exclude the value of the land.
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