What must federally insured lending institutions do in the event of a community suspension from the NFIP?

In the event of a community suspension from the National Flood Insurance Program (NFIP), federally insured lending institutions are required to notify applicants of the flood hazard associated with properties in the community and inform them that they are ineligible for disaster relief under the NFIP due to the community's suspended status. This requirement serves to ensure that applicants are fully aware of the risks they may face and the consequences of obtaining a loan in a suspended floodplain community, where federal flood insurance is not available.

Understanding this notification requirement helps protect consumers from making uninformed financial decisions that could lead to significant losses due to flooding. It also emphasizes the importance of being aware of the community's status regarding flood insurance and the potential lack of federal assistance in the event of flooding. Therefore, the correct response reflects the necessity for transparency and consumer awareness in the lending process during such circumstances.