cfacts: flood determination FAQ

What is a flood determination?

What is FEMA?

What is a Special Flood Hazard Area (SFHA)?

What is the National Flood Insurance Program (NFIP)?

When is a Flood Determination necessary?

Can a lender rely on a previous determination when refinancing?

Does the purchase of a loan from another lender require a new determination?

What must the lender provide the borrower, relating to a flood determination?

Is flood damage covered by homeowners policies?

Does cfacts offer flood insurance?

What is a flood determination?
A flood determination specifies whether or not a building or mobile home is located in a Special Flood Hazard Area (SFHA). If it is located in one of these SFHA's, the purchase of flood insurance is mandatory (Flood Disaster Protection Act of 1973). The determination also specifies whether or not Federal Flood Insurance is available for that particular structure. Reasons why Federal flood insurance might not be available include: a) the community does not participate in the NFIP, or b) the building/mobile home is in a Coastal Barrier Resources Area (CBRA) or Otherwise Protected Area (OPA). The determination is made by examining FEMA records and maps, and includes the number and date of the FEMA map used.

What is FEMA?
FEMA is the Federal Emergency Management Agency, the federal agency that coordinates the National Flood Insurance Program.

What is a Special Flood Hazard Area (SFHA)?
A SFHA is an area with a 1 percent annual chance of flooding. A home in the 1 percent annual chance floodplain has a 26 percent chance of getting flooded over a 30-year period.

What is the National Flood Insurance Program (NFIP)?
The National Flood Insurance Program (NFIP) is a Federal program enabling property owners in participating communities to purchase insurance protection against losses from flooding. To qualify for the program, the local community must agree to adopt and enforce a floodplain management ordinance to reduce future flood risks to new construction in Special Flood Hazard Areas.

When is a Flood Determination necessary?
All loans that would be secured by a lien on improved real property or an affixed mobile home must have a Standard Flood Hazard Determination form completed. Other 'triggering events' may also cause a determination to be needed, for example: making, increasing, extending, or renewing a designated loan. The determination must be made regardless of whether the building/mobile home is in a community that participates in the NFIP.

Can a lender rely on a previous determination when refinancing?
If the same lender is refinancing the loan, the previous determination may be used as long as it is less than seven years old and there were no map revisions or updates affecting the security property since the original determination was made. A lender other than the original lender cannot rely on a previous determination on a refinancing.

Does the purchase of a loan from another lender require a new determination?
No, buying a loan is not an event that requires the purchaser to make a new determination. The National Flood Insurance Reform Act (NFIRA) requires lenders to report Change of Servicer within sixty days.

What must the lender provide the borrower, relating to a flood determination?
The lender is not required to provide a copy of the determination to the borrower, although many do this as a courtesy. However, if the security property is located in a flood hazard area, the lender must provide written notification of the flood hazard status to at least one of the borrowers in advance of signing the purchase agreement or lease. If the borrower has not purchased flood insurance after 45 days of the notification, the lender must purchase flood insurance on behalf of the borrower.

Is flood damage covered by homeowners policies?
No, flood damage is generally not covered by homeowners policies. Coverage for flood damage can be obtained through the National Flood Insurance Program (NFIP).

Does cfacts offer flood insurance?
No, cfacts provides flood determinations only, not flood insurance. To learn how to obtain flood insurance, visit the Federal Emergency Management Agency (FEMA) web site at www.fema.gov.