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Top 10 Facts Every Lender needs to know About the National Flood Insurance Program (NFIP).  

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The National Flood Insurance Program was created by theNational Flood Insurance Act of 1968. Two subsequent laws, the Flood Disaster Protection Act of 1973 and the National Flood Insurance Reform Act of 1994, have made the purchase of flood insurance mandatory for Federal or Federally related financial assistance for acquisition or construction of buildings in Special Flood Hazard Areas.

These top ten facts apply to lenders that are supervised by the Comptroller of the Currency, Board of Governors of the Federal Reserve System, Federal Deposit Insurance Corporation, Office of Thrift Supervision, Farm Credit Administration, and National Credit Union Administration, as well as Government Sponsored Enterprises Freddie Mac and Fannie Mae and Federal agency lenders.

1. Flood insurance is mandatory for buildings in FEMA-identified high-risk flood areas,which are called Special Flood Hazard Areas (SFHAs).

2. Ensure that flood insurance coverage is maintained for the term of the loan.

3. Flood zone determinations are required to establish whether a building is located in a SFHA.

4. Know the amount of flood insurance coverage to require.

5. Notify borrowers in writing of the requirement to buy flood insurance for new and  existing loans.

6. Escrow flood insurance premiums.

7. There is no waiting period for flood insurance to go into effect when it is purchased in
connection with the making, increasing, renewing, or extending a loan.

8. Notify the insurance company or agent when the lender or servicer of a loan changes.

9. For more information about the mandatory purchase of flood insurance requirements, and other related topics, read The Mandatory Purchase of Flood Insurance Guidelines.

10. Flood insurance and the mandatory purchase laws help protect your investments as well as your borrowers' against uninsured flood losses.




1. Flood insurance is mandatory for buildings in FEMA-identified high-risk flood areas, which are called Special Flood Hazard Areas (SFHAs).


2. Ensure that flood insurance coverage is maintained for the term of the loan.


3. Flood zone determinations are required to establish whether a building is located in a SFHA.


4. Know the amount of flood insurance coverage to require.


5.Notify borrowers in writing of the requirement to buy flood insurance for new and existing loans.



6. Escrow flood insurance premiums. The law requires you to escrow flood insurance premiums for homes in SFHAs when taxes, other forms of insurance, or any other payments are escrowed.


7. There is no waiting period for flood insurance to go into effect when it is purchased in connection with the making, increasing, renewing, or extending a loan.


8. Notify the insurance company or agent when the lender or servicer of a loan changes.


9. For more information about the mandatory purchase of flood insurance requirements, and other related topics, read the Mandatory Purchase of Flood Insurance Guidelines.<


10. Flood insurance and the mandatory purchase laws help protect your
investments as well as your borrowers' against uninsured flood losses.


For more information call the National Flood Insurance Program toll free
at 1-800-427-4661, TDD# 1-800-427-5593.

F-215 (7/04) Last Modified: Tuesday, 11-Apr-2006 15:58:22 EDT

Information presented on this page is public information distributed by
the Federal Emergency Management Agency (FEMA )
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