Real Hazards Incorporated

Top 10 facts every lender needs to know about flood determinations

1. Many of FEMA’s Flood maps are far from perfect and some don’t show streets on them.

2. All determinations that are close to a flood zone should be researched with FEMA’s Flood Insurance Rate Maps and an assessor's parcel map.

 3. Not all assessor’s parcel maps are readily available.

4. Some determinations are going to require a plot plan, survey or measurements showing  an exact footprint of the collateral structure.

5. Facts 1-5 can delay the determination process and therefore Facts 6 and 7 need to be heeded.

6. Notify borrowers in writing of the requirement to buy flood insurance within a reasonable  time (defined by Federal regulation as at least 10 days) prior to the loan closing.

7. Order flood determinations early in the loan process.

8. Flood determinations are only required of "improved real estate" (real estate upon which a building or mobile home is located).

9. Flood determinations are supposed to be based on the Flood Insurance Rate Maps only, elevations are not to be taken into consideration. *

10.Borrowers who have reason to dispute the flood hazard determination presented by a lender may request, jointly with the lender, that FEMA review that determination. See Flood Review.

Life of Loan Tracking: What does it mean?

Some Websites and salespeople from other flood determination companies may be telling you that Life of Loan Tracking, the monitoring of new flood maps that may affect the flood insurance status of your property, is required by law and that they can provide this service along with the original determination.

Let me dispel this notion --
The Reform Act of 1994 clearly requires lenders to check the status of security property for loans when triggered by the statutory tripwires. The Reform Act did not add remapping of flood maps to this list. The joint final rule does not require that determinations be made at any time other than when a loan is made, increased, extended, or renewed.

Don’t get me wrong! It is a good idea to track your portfolio, but it is not a requirement by law.


However, Lenders that sell loans to the GSEs (government-sponsored enterprises, Freddie Mac and Fannie Mae) , and companies that service loans for the GSEs, must monitor on an ongoing basis the flood zone status of any loans sold to, or serviced for, the GSEs.

*Although FEMA uses the most accurate flood hazard information available, limitations of scale or topographic definition of the source maps used to prepare the FIRM may cause small areas that are at or above the flood elevation to be inadvertently shown within the SFHA boundaries.

The property owner or lessee may apply for a Letter of Map Amendment (LOMA) or a Letter of Map Revision - based on Fill (LOMR F). LOMAs and LOMR Fs are documents issued by FEMA that officially remove a property and/or structure from the SFHA.

The issuance of a LOMA or LOMR F eliminates the Federal flood insurance purchase requirement as a condition of Federal or federally backed financing; however, the mortgage lender retains the perogative to require flood insurance as a condition of providing financing, regardless of the location of the structure. Instructions and forms for LOMA/LOMR.

An Elevation Certificate completed by a Registered Professional Engineer of Licensed Land Surveyor will be required for a LOMA application.

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 Flow chart for  Mandatory Purchase  of Flood Insurance at  Loan Origination

 Flow chart for Trigger Points  During Life of Loan

Between 20-25% of all flood claims paid by the NFIP are outside of Special Flood Hazard Areas.