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|  As with all federal regulations, maintaining compliance begins with understanding them. Understanding the mandatory purchase of flood insurance requirements and the flood insurance guidelines is no simple task. In the nearly two decades that we’ve been in business, you could say that we’ve just about heard it all. With all of our experience and expertise, we have the resources to give you the answer to pretty much any flood compliance question that comes your way. On this page you’ll find a collection of responses to the most frequently asked questions about both regulations and our policies and procedures. Hopefully, we can impart a bit of the knowledge that we’ve gained through our many years of flood experience. In addition to the information we provide here, we encourage you to seek guidance and direction from your legal department or from the Regulatory Agency itself. If you read anything that triggers another question that you don’t see here or if you have any suggestions, please contact us directly at (800) 447-1772 or clientsupport@flooddata.com. ALPHABET SOUP Let us alleviate some of the frustration that can result from the myriad of flood-related abbreviations and acronyms. We’ve compiled a list of the most commonly used terms to help you. LINKS & RESOURCES Check out the comprehensive compilation of informative industry links and flood compliance resources.
1. GENERAL FLOOD COMPLIANCE 1. What is a flood? The National Flood Insurance Program (NFIP) defines a flood as "a general and temporary condition of partial or complete inundation of normally dry land areas from overflow of inland or tidal waters or from the unusual and rapid accumulation or runoff of surface waters from any source." 2. What is flood insurance? Isn’t flood damage covered by homeowner’s insurance? Available in participating communities through the National Flood Insurance Program, federal flood insurance provides monetary protection against direct physical loss by or from a flood to an insured property. Furthermore, as a means of recovering from the aftereffects of flooding, it is a more dependable alternative to federal disaster assistance, which is only available during a Presidentially declared disaster and must be repaid as an interest-bearing loan. Standard homeowner’s insurance does not cover property damage caused by a flood. 3. Why are banks, mortgage companies, loan servicers and other lending institutions involved in requiring flood insurance? Prior to flood insurance being offered through the National Flood Insurance Program in 1968, federal disaster relief was the only financial assistance provided to flood victims as the private insurance industry did not offer flood damage coverage. The monetary drain on the U.S. Department of the Treasury and taxpayers from repeated flood disasters led to this federal intervention. The cycle of flooding followed by federal disaster assistance continued as the federal government learned that property owners were not voluntarily purchasing flood insurance. To further shift financial responsibility from taxpayers to policyholders, the federal government first mandated flood insurance coverage for properties in designated flood hazard areas in 1973 by requiring federally regulated banks, mortgage companies, loan servicers and other lending institutions to make flood insurance coverage a condition of the loan. 4. What is the mandatory purchase of flood insurance requirement? Federally regulated banks, mortgage companies, loan servicers and other lending institutions cannot make, extend, renew or increase a loan on improved real estate located or to be located within a Special Flood Hazard Area in a community that participates in the National Flood Insurance Program unless the improved real estate or personal property securing the loan has flood insurance coverage for the life of the loan. 5. 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. 6. What major laws have been passed that involve federal flood insurance and the flood insurance requirement? The National Flood Insurance Act of 1968 authorized the creation of the National Flood Insurance Program (NFIP). This made federally subsidized flood insurance available to property owners residing in communities that agreed to participate in the NFIP through the adoption of floodplain management guidelines. The Flood Disaster Protection Act of 1973 mandated that federally regulated flood insurance be required as a condition of loans extended on improved real estate located within the designated Special Flood Hazard Area. The National Flood Insurance Reform Act of 1994 (the “Reform Act”) significantly strengthened the mandatory purchase requirement by instituting regulatory fines against lending institutions that failed to comply. It also required, in certain conditions, the escrow of flood insurance premiums and the lender-placement of flood insurance, and it developed a standard form and criteria for documenting lending institutions’ compliance. 7. How are the banking regulators involved? The 1994 Reform Act required that banking regulators enforce the flood insurance regulations for the lending institutions subject to their jurisdiction. The regulators monitor compliance through examinations and assess civil penalties as applicable. The banking regulators are the Federal Reserve Board, the Office of the Comptroller of Currency, the Office of Thrift Supervision, the Federal Deposit Insurance Corporation, the National Credit Union Association and the Farm Credit Administration. 8. What do the Regulators consider to be violations of the flood insurance regulations and what are the penalties that can be imposed on lending institutions? Violations under the federal regulations include making, increasing, renewing, or extending a loan on improved real estate in the Special Flood Hazard Area without (1) Placing flood insurance, (2) Escrowing premiums for flood insurance, when applicable, (3) Providing required Notices, and (4) Lender-placing flood insurance, when applicable. A regulated lending institution that is found to have a pattern or practice of committing violations shall be assessed a civil penalty of $350 per violation up to an aggregate annual amount of $100,000 against an institution. Additional actions that can be taken against an institution include unsatisfactory bank ratings and cease and desist orders in extreme cases. 9. How is the secondary market, such as Fannie Mae and Freddie Mac, involved in the flood insurance requirements? Government-Sponsored Enterprises, including Fannie Mae and Freddie Mac, are required to implement procedures to ensure that flood insurance is obtained and maintained on designated loans. Fannie Mae and Freddie Mac accomplish this through the agreements they enter into with the lending institutions that sell loans to them. As a condition of Fannie Mae and Freddie Mac’s agreement to purchase loans from a lending institution, the lender must adhere to the mandatory purchase of flood insurance regulations. 10. Are there special flood insurance requirements for loans sold to the secondary market, such as Fannie Mae and Freddie Mac? Because Fannie Mae and Freddie Mac are privately owned corporations, they can protect themselves by establishing loan purchase guidelines that are more stringent than the federal regulations. For example, for a single family residence, Fannie Mae and Freddie Mac require that flood insurance be maintained in an amount at least equal to 80% of the replacement cost of the insurable improvements; while the federal regulations only require coverage at least equal to the outstanding balance of the loan (up to the value of the improvements.) Another special requirement to note is that while the regulations do not prohibit the making, extending, increasing, or renewing of loans on properties in the Special Flood Hazard Area located in non-participating communities, Fannie Mae and Freddie Mac will not purchase them. Lending institutions that sell loans to the secondary market should familiarize themselves with the details of these guidelines. Back to Top 2. PARTICIPATION IN THE NFIP 1. What is the Federal Emergency Management Agency? For over twenty years, the Federal Emergency Management Agency’s (FEMA’s) mission has been to lead America to prepare for, prevent, respond to and recover from disasters. In 1979, through an executive order of President Carter, FEMA was created as a separate federal agency responsible for coordinating national hazard mitigation and recovery efforts. In March 2003 FEMA became part of the newly formed Department of Homeland Security under the Office of Emergency Preparedness and Response. Today, FEMA manages the National Flood Insurance Program and the U.S. Fire Administration. FEMA continues to lead the effort to prepare the nation for all hazards and effectively manage federal response and recovery efforts following any national incident. It also initiates proactive mitigation activities and trains first responders. 2. What is the National Flood Insurance Program? The National Flood Insurance Program (NFIP) is managed by FEMA and contains three components: flood insurance, floodplain management and flood hazard mapping. Participation in the NFIP is determined by whether the community adopts and enforces floodplain management ordinances in exchange for the protection of federal flood insurance availability to its citizens. Nearly 20,000 “participating communities” across the United States voluntarily participate in the NFIP. Congress authorized the NFIP in 1968 as part of the National Flood Insurance Act, making federal flood insurance available to property owners for the first time. Prior to moving under the sponsorship of FEMA in 1979, the NFIP was part of the Department of Housing and Urban Development. 3. What is the difference between the National Flood Insurance Program’s (NFIP’s) Emergency Program and its Regular Program? The initial phase of a community’s NFIP participation is the Emergency Program. It provides a limited amount of flood insurance for the community’s citizens at less than actuarial rates in return for an agreement of basic floodplain management to control development. Communities in the Emergency Program either do not have a flood map that identifies its flood hazard areas or it has a Flood Hazard Boundary Map (FHBM) that approximates the flood hazard areas (because it is not based on a detailed flood study.) For communities that participate in the Emergency Program, flood insurance coverage is limited to $35,000 for a residential building and $10,000 for residential contents. Approximately one percent of the participating communities are in the Emergency Program. A community that joins the Regular Program is usually provided with a detailed Flood Insurance Study based on an engineering analysis and a Flood Insurance Rate Map (FIRM) that delineates the Special Flood Hazard Areas. In return, the community adopts a more comprehensive floodplain management ordinance, which more fully controls development. In the Regular Program, flood insurance coverage is available up to $250,000 for a residential building and $100,000 for residential contents. 4. What happens if a community does not participate in the NFIP? Participation in the NFIP is voluntary, yet for properties located in non-participating communities flood insurance through the NFIP is not available and disaster assistance is limited. In the event of a flood disaster, federal disaster assistance is not available for repair or reconstruction of buildings located in the Special Flood Hazard Area (SFHA). Federally backed loans, such as those made through the Federal Housing Administration, the Department of Veteran’s Affairs, or the Small Business Administration, cannot be made for acquisition or construction of improved real estate located in the SFHA. However, conventional loans can be made, even on properties in the SFHA. Even though flood insurance is not available, lending institutions are still required to determine if the improved real estate is within the SFHA. Lending institutions must consider the risks of making loans on these properties given that flood protection is limited. Flood insurance might be available through private insurance companies outside of the NFIP, but at a much higher premium. 5. How does the annexation of land area between communities impact the availability of flood insurance? When a participating community acquires (through annexation or otherwise) an area from a non-participating community, flood insurance becomes available on properties within the newly acquired area. When a non-participating community acquires an area from a participating community, no new flood insurance policies can be written on properties within the annexed area and existing policies cannot be renewed upon expiration unless and until the non-participating community joins the program. 6. What does it mean if a community is on Probation? What about Suspension? By participating in the National Flood Insurance Program, communities agree to adopt and enforce floodplain regulations governing construction and development in and around Special Flood Hazard Areas. In return, the federal government makes flood insurance and federal disaster assistance available to the community and its residents. FEMA works with communities to help them comply with this agreement; however, if the community fails to comply and does not correct its actions even after a 90-day written notice, then the community is placed on probation. The probationary period continues for at least one year, and during that timeframe, a $50 surcharge is added to insurance policies as they are issued or renewed within that community. The purpose of probation is to focus the community’s efforts on corrective action so as to avoid suspension. If a community fails to correct its non-compliant actions, then that community is given 30 days to demonstrate to FEMA why it should not be suspended from the program. If suspended, it becomes a non-participating community, and no new policies can be issued nor can they be renewed. Policies in force at the time of the suspension remain in force until the coverage period expires. Back to Top 3. FLOOD ZONE DETERMINATIONS (Part I) 1. How do lending institutions determine a loan’s flood insurance requirement? The lending institution must determine or have a third party determine if a building or mobile home (and personal property securing the loan, if applicable) is located within a Special Flood Hazard Area (SFHA) as shown on the effective Flood Insurance Rate Map for the property’s community. If any portion of the improvements is located within the SFHA, then flood insurance is required. The steps, as outlined by FEMA, to make the flood zone determination are as follows: (1) Find the correct flood map, (2) Find the general location of the subject property, (3) Find the specific location of the subject property’s improvements on the flood map, and (4) Identify the flood insurance risk zone as shown on the flood map. Learn more about reading a Flood Insurance Rate Map. 2. When is a lending institution required to make or obtain a flood zone determination? A flood zone determination must be made or obtained whenever a federally regulated lender makes, extends, increases or renews a loan secured by a building or mobile home. In addition, federal regulators recommend that lenders and servicers, as a matter of safety and soundness, conduct periodic reviews of existing portfolios and perform prospective analyses on portfolio acquisitions, as well as monitor changes triggered by flood map revisions. 3. Is the Standard Flood Hazard Determination Form required? Are there exceptions? Yes, the Standard Flood Hazard Determination Form (SFHDF) is a required federal document that federally regulated lending institutions must complete or have completed as a condition of making, extending, increasing, or renewing a loan that is to be secured by improved real estate. Loans that are exempt from the mandatory purchase requirements, including the requirement for a flood zone determination, are on state-owned property covered by self-insurance acceptable to the director of FEMA and on loans with an original outstanding balance of $5,000 or less and a repayment term of one year or less. 4. Is a Standard Flood Hazard Determination Form required for a condominium unit, a cooperative unit, or a commercial building? Yes, the mandatory purchase requirements, including the requirement for a flood zone determination, apply equally to commercial properties as they do to residential properties. In addition, the requirements apply to condominium, cooperative, timeshare units and all forms of single or multi-family dwellings. 5. What are the major obligations for lending institutions with respect to flood zone determinations?Lending institutions have the following obligations: (1) Determine whether the building is or will be located in an SFHA; (2) Document the flood hazard determination; (3) Require that flood insurance (when it is required) is obtained to the appropriate limit; and (4) Ensure that required flood insurance is maintained for the term of the loan or added if the property is subsequently determined to be in an SFHA. 6. Is a lending institution required to provide a copy of the Standard Flood Hazard Determination Form to its borrower? There is no requirement for the lending institution to provide a copy of the Standard Flood Hazard Determination Form to the borrower, regardless of whether or not the property is within the SFHA. However, the lending institution must keep a record of the flood zone determination or be able to retrieve a copy of the form in the event that a regulator requires it. 7. How long before the loan closing should a lending institution complete or obtain a Standard Flood Hazard Determination Form? The regulations do not prescribe a specific timeframe prior to a loan closing; however, if the property is in the SFHA, then within a reasonable time period prior to the loan closing, the lending institution must provide a notice to the borrower stating that flood insurance is required. Some regulators agree that a “reasonable period of time” is at least 10 days. 8. Is a lending institution required to use a third-party provider, such as First American Flood Data Services, for its flood zone determinations? Lending institutions may make their own flood zone determinations; however, most choose to use a third-party provider because of the resources and expertise required to make the determinations and the guarantees provided by these companies. For a lender to use a flood zone determination made by a third-party provider, the determination must be “guaranteed” according to the regulations. Lenders should ensure that the company is following FEMA guidelines with respect to its flood zone determinations. 9. What type of indemnification and guarantee does First American offer with its flood zone determinations? First American guarantees its flood zone determinations as required by federal regulations. The specifics of the guarantee are prescribed by the Standard Service Agreement between First American and its client and may vary according to the particular product. Generally speaking, if First American incorrectly states that a building is not in the SFHA on the effective Flood Insurance Rate Map and the building suffers flood damage, then First American will reimburse the client for the structural damage caused by flood as if a valid NFIP flood insurance policy were in effect at the time of the loss. Conversely, if First American incorrectly states that a building is in the SFHA on the effective Flood Insurance Rate Map and a flood insurance policy is required based on this flood zone determination, then First American will reimburse the client up to the amount of the flood insurance policy premiums. 10. Can a lending institution use a flood zone determination that was completed for a previous transaction? A lender may only rely on a previous flood zone determination when increasing, extending, renewing or purchasing a loan, not when a lender originates or makes a loan. The previous determination must have been completed within seven years on the same property and recorded on the Standard Flood Hazard Determination Form. Furthermore, the lender must confirm that no map revisions or updates since the original determination have placed the property into the Special Flood Hazard Area or affected the area of the property. 11. If a prior flood zone determination stated that a property was not in the Special Flood Hazard Area (SFHA,) but a more recent determination based upon a revised flood map states that it is now within an SFHA, can the property be “Grandfathered” out of the flood zone, thereby waiving the flood insurance requirement? The mandatory purchase of flood insurance decision must be based on the current Flood Insurance Rate Map for the property’s community. The effective flood map supersedes a flood zone determination based upon a previous, outdated flood map. There is no “grandfathering” of the mandatory purchase requirement; however, a flood insurance policy may be rated on the prior flood map under certain conditions. Back to Top 4. FLOOD ZONE DETERMINATIONS (Part II) 12. What if the borrower or other party disagrees with the results of a flood zone determination? It is not uncommon for other parties, such as borrowers, surveyors, community officials, realtors, insurance agents, builders, or appraisers to have differing opinions about a property’s flood zone designation. This can occur for a variety of reasons: (1) Reliance on information other than the Flood Insurance Rate Map, (2) Historical information that differs from the flood map, (3) Updated information not reflected on the flood map, (4) Different interpretations of the flood map, or (5) A resistance to paying for the required flood insurance. When a dispute over a flood zone determination occurs, a discussion of the methodology used and a review of the flood map can often resolve the situation. A First American representative can assist with this review, and in most situations, is able to resolve the dispute. If, after the review, the borrower still believes that the flood map has not been interpreted correctly, then the borrower, jointly with the lender, can request a Lender Determination Review through FEMA. 13. What is the Lender Determination Review process and what is required of the lender and borrower? The Lender Determination Review is a process through which FEMA will determine if the Standard Flood Hazard Determination Form (SFHDF) that includes the flood zone determination used by the lender is accurate. For example, if a lender is requiring flood insurance based upon a flood zone determination that states that the subject property is in the Special Flood Hazard Area (SFHA,) then FEMA will confirm whether or not the property is indeed in the SFHA based upon the Flood Insurance Rate Map (FIRM.) FEMA requires the following items for this process: (1) A letter signed by both the borrower and lender requesting the review, (2) A copy of the lender’s SFHDF, (3) A copy of the dated Notice to Borrower document, (4) A copy of the applicable FIRM, (5) All documents used by the lender to complete the flood zone determination, and (6) A check or money order in the amount of $80.00 made payable to the NFIP. This request must be submitted within 45 days of the Notice to Borrower document. 14. How could another flood zone determination company, using the same flood map, reach a different conclusion about the flood zone? Differing interpretations of the flood map may occur from time-to-time, especially in areas where the flood map does not include details or for properties near the edge of the Special Flood Hazard Area. The specific location of the building is fundamental to the flood zone determination; thus, a few feet difference in a building’s location can result in a different conclusion on the Standard Flood Hazard Determination Form. When a discrepancy in flood zone determinations occurs between flood compliance vendors, the lending institution can request that the companies review their work, which hopefully leads to a consensus. In some cases, the vendors may be able to provide a flood map exhibit showing how they reached their conclusion. If the matter cannot be resolved, then the borrower and lender may elect to pursue a Lender Determination Review, if appropriate. 15. If a portion of the land is in the Special Flood Hazard Area, but the building itself is not, what will the flood zone determination state and is flood insurance required? The Standard Flood Hazard Determination Form asks the following question: “Is the Building/Mobile Home in Special Flood Hazard Area (Zones containing the letters ‘A’ or ‘V’)? “ Thus, the mandatory purchase of flood insurance requirement is tied to the location of the improvements (building/mobile home) on the property and not the land itself. If no portion of the building itself (including decks and screened porches) is located within the Special Flood Hazard Area on the flood map, then the federal flood insurance requirement does not apply. 16. What is the Notice of Special Flood Hazards and Availability of Federal Disaster Relief Assistance form (or Borrower Notification Letter) and when is it to be used? Is a Lending Institution required to use the sample form of this Notice found in the regulations? When a lending institution makes, increases, renews, or extends a loan, and it is determined that the building securing the loan is located or to be located in the Special Flood Hazard Area (SFHA), then within a reasonable period of time before the loan closing, the lender is to provide a written notice to the borrower informing him or her of the special flood hazards. The written notice must contain the following: (1) A warning that the building is within an SFHA, (2) A description of the mandatory purchase of flood insurance requirements, (3) A statement as to whether flood insurance may be purchased through the NFIP or through a private insurer, and (4) A statement as to whether federal disaster relief is available in the community, as well as other relevant flood insurance information. The regulations require that lenders be able to retrieve documentation evidencing the borrower’s receipt of the Notice. Lenders may use the sample form of the Notice and are considered to be in compliance if they do; however, although the regulations do not require the use of the sample form, lenders must ensure that the version they use contains the fourfold regulatory requirement listed above. Back to Top 5. FLOOD MAPS 1.Who makes the flood maps? What are the purposes of the flood maps? FEMA works with states, communities and the private sector to produce flood maps for communities throughout the United States and its territories. Over 100,000 map panels produced by FEMA provide valuable information for community officials, developers, insurance personnel, surveyors, lending institutions, real estate agents, engineers and private citizens. Flood maps are used to guide and control development, determine potential risk of flooding, aid in floodplain management, determine a loan’s flood insurance requirement, and determine the proper flood insurance rate. 2. What is the difference between a Flood Hazard Boundary Map (FHBM) and a Flood Insurance Rate Map (FIRM)? Used in FEMA’s Emergency Program, an FHBM is provided by FEMA and based on approximate data that reflects a general representation of the community’s Special Flood Hazard Areas. When a community converts from FEMA’s Emergency Program to its Regular Program, FEMA provides the community with a FIRM. Typically, this map is based on a Flood Insurance Study (FIS), which is a detailed floodplain assessment. The FIRM includes the floodplain’s Base Flood Elevations (BFEs) and the delineation of the regulatory floodway. This detailed information is used to direct floodplain management and rate flood insurance based upon the actuarial computation of the risk. 3. What is the Special Flood Hazard Area (SFHA)? An SFHA, otherwise known as the one-percent-annual-chance floodplain, is commonly referred to as the “100-year floodplain.” However, FEMA and its communities are moving away from this reference because it can easily be misinterpreted to mean that a community will only flood once every one hundred years. In fact, the true meaning of the term is quite the opposite: In any given year, there is actually a one percent chance or greater that an SFHA will experience flooding that equals or exceeds its boundaries. There are geographic areas that have sustained multiple “100-year” or “one-percent-annual-chance” floods within concurrent years. On the Flood Insurance Rate Map (FIRM,) the SFHA is shown as a darkly shaded area labeled as a flood zone containing the letters “A” or “V”. FIRMs based upon a Flood Insurance Study may include the demarcation of the regulatory floodway within the SFHA. 4. What is the regulatory floodway? Does a lending institution have to report whether or not a property is in the Floodway? The floodway is the stream channel and the adjacent land area reserved to discharge the one-percent-annual-chance flood without increasing the Base Flood Elevation by more than one foot. Beyond the limits of the regulatory floodway is the flood fringe. These two elements combined make up the SFHA or one-percent-annual-chance floodplain, which is shown on a FIRM or Flood Hazard Boundary Map as a darkly shaded area. To comply with the mandatory purchase requirement and to complete the Standard Flood Hazard Determination Form, a lending institution is not required to report whether or not a property lies within a regulatory floodway; however, a lending institution is required to determine if a building is located or to be located in an SFHA. 5. What are the flood zones that appear on the flood maps and what do they mean? We’ve compiled a list of the various flood zones, including definitions and whether or not the flood insurance requirement applies on properties located within the flood zones. 6. How accurate are the flood maps? Are the flood maps ever revised?FEMA and its mapping partners (states, communities, and private companies) make every effort to produce flood maps that accurately depict the flooding risk in a given geographic area. Even with recent technological advances that offer improvements in precision, the accuracy can vary depending on the technical data and the resources used to create them. Likewise, with development, population growth and flood mitigation efforts, flood hazard areas within a community change over the course of time, affecting the accuracy of the flood maps. In some communities, the effective maps date back to the 1970s, when the effort to produce flood maps for the entire country began. It is possible that these maps do not accurately reflect the current flood hazard areas for these communities. FEMA and the federal government recognize the need for map improvements; therefore, the government has committed extensive resources to update its entire inventory of flood maps. In the coming years, it is anticipated that these updated maps will provide a more accurate depiction of the level of flood risk. FEMA’s goal is to consider the need for remapping a community every five years. Because there is a limit to the precision with which the flood maps can reflect every rise and fall in the terrain on a given property, FEMA allows individual property owners to submit technical data in an effort to have the flood map amended for their particular property—this is called the Letter of Map Amendment process. 7. What is the future flood hazard area and do the mandatory purchase requirements apply? The future flood hazard area shows the locations that would be inundated by the one-percent-annual-chance floodplain based upon future hydrology conditions. This determination is based on a community’s plan for development and projected growth; the future flood hazard area reflects the changes that will occur to the flood hazard area based upon that plan. A community has the choice to have the future flood hazard area appear on its flood maps. If shown, it appears as a lightly shaded area on the flood map (similar to the shaded X zone) and is labeled as “X (FUTURE).” The mandatory purchase of flood insurance requirement does not apply to properties located within the future flood hazard area. 8. What is a Coastal Barrier Resource Area (CBRA)? Does the flood insurance purchase requirement apply to loans secured by properties located in a CBRA? A Coastal Barrier Resource Area (CBRA) is a geographic area designated by Congress that is protected from development because of its rich biological habitats and geologic features. Since the passage of the Coastal Barrier Resources Act of 1982, federal funds in the form of a loan, insurance payment, subsidy, grant, or guarantee are prohibited except for certain emergency situations. No federally backed loans can be made for the purpose of constructing or purchasing improved property in a CBRA. Federal flood insurance is not available on properties that were built, or substantially improved, after the area was designated as a CBRA. Even though conventional loans can be made to purchase improved property in these areas, lending institutions should be aware that such loans would not be protected by flood insurance. As for the mandatory purchase of flood insurance requirements, lending institutions are required to determine if the buildings on these properties are within the Special Flood Hazard Area (SFHA.) If so, then the date of the building’s construction is compared with the CBRA designation date to determine flood insurance availability. Again, if the building was constructed after the date of the CBRA designation, then federal flood insurance is not available. The same requirements and restrictions apply to Otherwise Protected Areas (OPAs), which are also shown on the Flood Insurance Rate Maps. OPAs are undeveloped coastal areas used primarily for wildlife refuge or resource conservation purposes. Back to Top 6. FLOOD MAPS: LETTER OF MAP REVISION & AMENDMENT 1. What is a Letter of Map Amendment (LOMA)? If a homeowner has a LOMA, is flood insurance still required? LOMAs are the result of an application process through which an individual property owner may submit materials to FEMA that support a belief that the property should not be required to have flood insurance. If the building on a property (and the ground adjacent to the building) is at a natural elevation (not elevated by fill dirt) higher than the Base Flood Elevation, then FEMA will usually issue a LOMA, removing the property from the SFHA. The flood insurance requirement is not waived unless or until the LOMA, which states that the building is outside of the SFHA, is issued. Until the flood map is amended by the LOMA, lending institutions are bound by the information shown on the current flood map. If a LOMA is issued, then the Standard Flood Hazard Determination Form can be updated. Once this occurs, the flood insurance requirement may be waived. Importantly, the lending institution may continue the flood insurance requirement to protect its interest. The borrower should be encouraged to consider flood insurance coverage, as approximately 25 percent of all claims paid by the NFIP are on properties outside of the SFHA. See First American’s Flood Compliance Kit for more information on the LOMA process. 2. What is a Letter of Map Revision (LOMR)? How does it differ from a LOMA? A LOMR is an official revision to a community’s current flood map. It is used to change flood zones, flood elevations, mapping features, and floodplain and floodway delineations. Because a community must approve and adopt any revision to its flood map, requests for LOMRs must be made directly to the community. This is true even if the change is to a single property that will be raised by fill dirt. In this instance, a Letter of Map Revision Based On Fill (LOMR-F), which can revise the flood map for a single property, is the appropriate procedure. Other LOMRs are much more detailed, technical, and expensive, and may even involve revising the floodplain along the entire stretch of a river through a community. A LOMR and a LOMA have different purposes. A LOMR involves revisions to a flood map based upon changes on the ground as opposed to a LOMA, which is an amendment to a flood map because it mistakenly showed a property within the SFHA. 3. How does one apply for a LOMA or LOMR? A property owner, or other involved party, can apply for a LOMA by completing the LOMA application and submitting the additional required documents to FEMA at the following address: FEMA Depot, 3601 Eisenhower Avenue, Alexandria, VA 22304-6425, Attention: LOMA Depot. Applications are available through the FEMA Map Assistance Center (877-336-2627), www.fema.gov, or by contacting First American’s Client Services Department at (800) 447-1772. Along with the completed application, applicants need to provide (1) A copy of the FIRM showing the location of the property, (2) An Elevation Certificate or other elevation documentation certified by a licensed surveyor or engineer, (3) A site plan or survey showing the location of the improvements on the property, and (4) A recorded deed or plat with the community’s recordation stamp. For Letters of Map Revision Based Upon Fill (LOMR-F), in addition to the above requirements, FEMA requires a processing fee (currently $425) and a Community Acknowledgement Form to be completed by a community official. All LOMRs, including LOMR-Fs, must involve the community since changes to a given property or geographic area might affect drainage to the surrounding area. (Applications for LOMR-Fs can also be sent to the attention of the LOMA Depot.) First American has additional information regarding the LOMA and the LOMR-F application processes available in the First American Flood Compliance Kit. LOMRs and Conditional Letters of Map Revision (CLOMRs) are more detailed and technical than any other application procedure, requiring the active involvement of the community and FEMA; therefore, it is prudent that the applicant involve the community at the onset of the application. Contact FEMA with any questions regarding the required fees and documentation for a LOMR and CLOMR as they vary depending on the particular project. LOMRs and CLOMRs applications should be sent to the attention of the LOMR Depot. 4. What is a Conditional Letter of Map Revision and can it be used to waive the flood insurance requirement? A Conditional Letter of Map Revision (CLOMR) is a formal opinion from FEMA that states whether or not a proposed project complies with floodplain management criteria and whether or not changes will be made to the existing Flood Map once the project is completed. The mandatory purchase of flood insurance requirement is based upon the current flood map; thus, a lending institution cannot waive the flood insurance requirement based upon a CLOMR. Once the project is completed, FEMA can review the CLOMR and the finished construction; if appropriate, it will issue a final LOMR that lenders can use to waive the flood insurance requirement. Back to Top 7. TOP FIVE REASONS WHY MY PROPERTY DOES NOT NEED FLOOD INSURANCE Even with the frequency of flooding events throughout the country, most lenders, servicers, and insurance personnel have heard various protests from homeowners when they are told that flood insurance is required for their home. Flooding is the most common and most costly form of natural disaster, yet people continue to feel as though it will not happen to them. We’ve prepared responses to some of the most common protests. Hopefully these can help you educate your borrowers and overcome their concerns. #1 Your customer says: “I’ve lived in this house for 20 years and it has never flooded.” Response: According to the Federal Emergency Management Agency’s (FEMA’s) Flood Insurance Rate Map for your community, your house is located in a Special Flood Hazard Area (SFHA.) By law, we are required to use FEMA’s maps to determine the flood insurance requirement for your house. These maps not only indicate flood risk areas based on historical data, but also engineering studies to determine the likelihood of flooding in a given area. The important thing to remember is that the SFHA is based upon a one-percent-annual-chance flood event. This means that an area might not flood for several decades or it might flood a few times in one year, depending on rainfall and drainage. Luckily, your property has not experienced a flood for quite some time; however, that is not an indicator of your future flooding probability. If you believe that your house is not within the SFHA, then you can submit an application to FEMA for a Letter of Map Amendment. Through this process, FEMA can determine if your house should be subject to the federal flood insurance requirement. Our flood zone determination vendor, First American Flood Data Services, can assist us with that process. I have a document called the First American Flood Compliance Kit that can help us get started. #2 Your customer says: “No one else in my neighborhood has to pay for flood insurance.” Response: There are several situations that could result in this scenario. Let’s explore them and see if we can determine the one that applies to you. Because the flood zone determination for flood insurance purposes is site-specific to each building, it is possible that the Flood Insurance Rate Map shows your house in a different flood zone than your neighbors’ houses. Secondly, the flood insurance requirement only applies to buildings that are secured by loans with federally regulated lending institutions; therefore, this requirement may not apply to them. Finally, perhaps your neighbors’ mortgage companies are not aware that the properties are in the Special Flood Hazard Area (SFHA.) Your neighbors should consider contacting their mortgage companies to confirm the flood zone status of their home. Of course, if you believe that your house is not within the SFHA, then you can submit an application to FEMA for a Letter of Map Amendment. Through this process, FEMA can determine if your house should be subject to the federal flood insurance requirement. Our flood zone determination vendor, First American Flood Data Services, can assist us with that process. I have a document called the First American Flood Compliance Kit that can help us get started. #3 Your customer says: “My survey states that I am not in the Special Flood Hazard Area. Are you indicating that my surveyor is wrong?” Response: We certainly are not saying that the surveyor is wrong. FEMA requires that federally regulated lenders, like us, make a flood zone determination for flood insurance purposes based solely upon the current Flood Insurance Rate Map. It is possible that your surveyor is basing the flood zone determination on information other than the Flood Insurance Rate Map, such as field elevations, updated community data, or a subdivision plat. We can discuss the matter with your surveyor to try to resolve the discrepancy. #4 Your customer says: “My house is on a hill. If it floods, the entire city is in trouble.” Response: We certainly understand your rationale; however, the flood zone determination for flood insurance purposes must be based upon the Flood Insurance Rate Map (FIRM.) Thus, if a portion of your house is located within the Special Flood Hazard Area (SFHA) on the flood map, then flood insurance is required. While FEMA and your community work to make the FIRMs as useful and accurate as possible, the maps may not reflect every rise and fall in the terrain. It is possible that the map inadvertently shows your property to be within the SFHA; when, in fact, your property is sufficiently elevated to not be under a substantial risk of flooding. If you believe that your house is not within the SFHA, then you can submit an application to FEMA for a Letter of Map Amendment. Through this process, FEMA can determine if your house should be subject to the federal flood insurance requirement. Our flood zone determination vendor, First American Flood Data Services, can assist us with that process. I have a document called the First American Flood Compliance Kit that can help us get started. #5 Your customer says: “I have an Elevation Certificate that says my property is well above the flood level.” Response: We recognize the importance of the Elevation Certificate for your property; however, according to the official Instructions, the Elevation Certificate “does not provide a waiver of the flood insurance purchase requirement.” The flood zone determination for flood insurance purposes must be based upon the Flood Insurance Rate Map. The Elevation Certificate has a threefold purpose: (1) Provide elevation information for community floodplain management, (2) Determine the proper insurance premium rate, and (3) Support a request for a Letter of Map Amendment. If the Elevation Certificate states in Box B8. that you are in a Special Flood Hazard Area (a zone beginning with the letters “A” or “V”), but that the building is elevated above the Base Flood Elevation, then your building might be a candidate for a Letter of Map Amendment. Through this process, FEMA can determine if your house should be subject to the flood insurance requirement. On the other hand, if the Elevation Certificate states in Box B8. that your building is in Zone B, C, or X (not in an SFHA,) then we would be happy to contact the surveyor to try to resolve the question. See First American’s Flood Compliance Kit for more information on the LOMA process. Back to Top 8. FLOOD INSURANCE 1. How does one obtain flood insurance? In communities that participate in the NFIP, a flood insurance policy may be purchased from one of these sources: a licensed insurance agent or broker in good standing in the State in which the agent is licensed or an agent representing a Write Your Own (WYO) company that is authorized to sell flood insurance policies. The process works as follows: (1) The agent and the applicant complete the flood insurance application; (2) The applicant provides necessary documentation, such as an Elevation Certificate; and (3) These documents and the full premium are sent to the NFIP or provided to the WYO; (4) The insurance policy is issued. 2. What are the limitations to the insurance protection provided by flood insurance? Flood insurance purchased through the NFIP provides the most comprehensive insurance protection available against flooding. The policy pays for direct physical loss to the insured building by or from flood damage, excluding personal contents. (Personal contents coverage may be purchased separately.) Additionally, a loss in progress is not covered by a new flood insurance policy. Be sure to review the flood insurance policy in detail to confirm what is covered and what is excluded. 3. Is there a waiting period before a flood insurance policy becomes effective? Are there exceptions to the waiting period? For new insurance policies, there is a standard 30-day waiting period; the policy becomes effective on the thirtieth calendar day from the date of the application and the presentment of payment, provided that the NFIP receives the application and payment within 10 days of the application date. The Congressional intent behind this statutory waiting period is to prevent the purchase of flood insurance at times of imminent flood loss. However, if the application for flood insurance is associated with loan activity, a requirement by the lender, or the remapping of the subject property’s community, then the 30-day waiting period does not apply. If the purchase of flood insurance is in connection with the making, extending, increasing, or renewing of a loan, then the flood insurance becomes effective at the time of loan closing, provided that the application and the presentment of payment is made at or prior to loan closing. In cases where a lender determines that flood insurance is required of a mortgagor who does not currently have insurance on the property, then the flood insurance policy becomes effective upon the completion of the application and the presentment of payment. When a property is remapped and placed into a Special Flood Hazard Area, then completion of the flood insurance application and presentment of payment made within 13 months of the map revision date will make the policy effective as of the day following the application and payment date. 4. How is the flood insurance premium determined? Flood insurance rates are set by the NFIP; therefore, an NFIP representative, WYO carrier or independent agent should quote the same premium. Flood insurance premiums are determined by a building’s age, design, occupancy, flood zone, and building elevations compared to flood elevations (for buildings within the Special Flood Hazard Area.) The premium is also based on the amount of coverage purchased and can be lower or higher depending on the community’s status. Keep in mind that the NFIP adds standard fees to all policies. For more information on rating a policy or on locating an insurance agent in a particular area, visit FEMA’s FloodSmart website. 5. When is an Elevation Certificate required for the rating of a flood insurance policy? An Elevation Certificate, or other elevation documentation certified by a surveyor or engineer and authorized by FEMA, is required if the building is post-FIRM, located within a Special Flood Hazard Area, and within a community that participates in the NFIP’s Regular Program. 6. What is a pre-FIRM or Post-FIRM building? For insurance rating purposes, the date of construction or date of substantial improvement (the date the permit was issued provided that construction begins within 180 days of the permit date) is utilized to determine if a building is considered “pre-FIRM” or “post-FIRM.” A building is considered pre-FIRM if the start of construction or substantial improvement was on or before December 31, 1974, or before the effective date of the community’s initial Flood Insurance Rate Map. Therefore, a post-FIRM building is one with a date of construction, or substantial improvement, after December 31, 1974 or on or after the effective date of the community’s initial Flood Insurance Rate Map. 7. Are there different kinds of flood insurance policies? The NFIP offers a Standard Flood Insurance Policy and a Preferred Risk Policy. The Standard Flood Insurance Policy has three policy forms: the Dwelling Form, General Property Form, and Residential Condominium Building Association Policy Form (RCBAP). Each policy form applies to properties based on the ownership type and occupancy. The Preferred Risk Policy applies, with certain conditions, to owners and tenants of eligible buildings located in the low to moderate-risk zones of B, C, and X in communities that participate in the Regular Program. 8. When is the Dwelling Form of the Standard Flood Insurance Policy used? The Dwelling Form covers only non-condominium residential buildings built principally as a dwelling for one to four families or for a single-family dwelling unit within a condominium building. The Dwelling Form pays losses on Replacement Cost value for buildings used as primary residences, which are insured at least to 80% of the building’s replacement cost. Separate contents coverage for personal property inside a building at the subject property is available for purchase with this form, as well. 9. When is the General Property Form used? The General Property Form covers commercial buildings or residential buildings that are not condominiums, including timeshares and cooperatives. Losses are handled on the basis of the building’s Actual Cash Value. Contents coverage is available for these buildings. 10. When is the Residential Condominium Building Association Policy used? The Residential Condominium Building Association Policy (RCBAP) is specifically designed for condominium associations to insure residential condominium buildings and its commonly owned elements. This policy covers condominium buildings located within communities that participate in the NFIP’s Regular Program and have 75% or more of the floor area dedicated to residential use. These buildings can be detached single-family buildings, row houses, townhouses, or low-rise and high-rise buildings. 11. Why do borrower's need to obtain an elevation certificate? An elevation certificate is generally needed for one of two reasons: 1. In order to determine the correct premium for a flood insurance policy. 2. When a property owner wishes to apply for a Letter of Map Amendment with FEMA to have their home or other structure officially "removed" from a SFHA. Back to Top 9. MYTHS ABOUT FLOOD INSURANCE #1 MYTH: My standard homeowner’s insurance policy will cover my losses if my house is damaged or destroyed in a flood. FACT: Homeowner’s insurance does not cover flood damage. Federal flood insurance can only be purchased through an insurance agent, insurance company or the NFIP. #2 MYTH: Federal disaster aid, available during and after a flood, will reimburse me for my losses. Therefore, I don't need to buy flood insurance for my home and belongings. FACT: FEMA disaster aid is only available if a Presidential Disaster is declared, which often does not happen after localized flooding. Even still, federal aid is not free. It’s usually in the form of a loan from the Small Business Administration that must be paid back with interest. The best protection is a flood insurance policy, which pays claims regardless of a Presidential Disaster declaration. #3 MYTH: I live outside the floodplain, so I don't need to buy flood insurance. FACT: Floods can occur anywhere. More than 25 percent of the flood insurance claims paid by the NFIP are for structures located outside of the identified floodplains (Special Flood Hazard Area). For properties located outside of the Special Flood Hazard Area (SFHA), flood insurance can be obtained at a substantially reduced rate. Also, if you obtain flood insurance while the property is shown outside of the SFHA, and subsequently, the flood map changes and places the property inside of the SFHA, your policy can be “grandfathered”, and you will continue to pay the lower rate. #4 MYTH: I can't buy flood insurance because my home has been flooded previously. FACT: If a property owner’s community is participating in the NFIP, then flood insurance may still be purchased. Only in extreme cases, in which the community, the property owner and FEMA are involved, would flood insurance coverage not be available for a property in a participating community. #5 MYTH: If people don't want to purchase flood insurance, it's their own business. It doesn't really affect me. FACT: When people do not buy flood insurance and a flood disaster strikes, the federal and state disaster relief comes from our tax dollars. Flood insurance is one of the best ways to keep disaster relief costs down for all taxpayers. #6 MYTH: Flood insurance is available only for homeowners. FACT: Flood insurance is available in participating communities to protect homes, condominiums and nonresidential buildings—including farm and commercial structures—regardless of whether they are in or out of the floodplain. In addition, contents coverage is available, which means renters can protect their possessions as well. #7 MYTH: If a flood is forecast in the near future, it's too late for me to purchase insurance. FACT: As long as the property is in a participating community, federal flood insurance can be purchased at anytime. However, unless the lender requires the flood insurance, there is a 30-day waiting period after an application is submitted and the premium must be paid before the policy is in effect. The policy will not, however, cover a loss in progress. #8 MYTH: I can only buy federal flood insurance through the federal government. FACT: Federal flood insurance can be bought through most major private insurance companies and property insurance agents. #9 MYTH: The NFIP does not offer any type of coverage for basements. FACT: The NFIP does offer coverage for basements, which it defines as any area of a building with a floor that is below ground level on all sides. Basement coverage under an NFIP policy includes clean-up expenses and repair or replacement of items used to service homes and buildings. This can include elevators, furnaces, water heaters, air conditioners, utility connections, circuit breaker boxes, pumps and tanks used in solar energy systems. Flood insurance will not cover the contents of a finished basement and basement improvements such as finished walls, floors and ceilings. #10 MYTH: Flood insurance is too expensive. FACT: Flood insurance through the NFIP is reasonably priced; the average premium is between $400 and $600 per year. For properties located in low risk areas (Zone B, C, or X), the premium is likely to be between $200 and $300 per year. Compare this to the cost of a low-interest disaster assistance loan, which must be repaid at about $300 to $400 per month! Back to Top 10. FIRST AMERICAN FLOOD DATA SERVICES’ PROCESSES 1. What is First American’s process for completing flood determinations? According to the federal regulations, the flood zone determination must be based upon the current FEMA Flood Insurance Rate Map (FIRM). The foundation of our flood zone determination process is a multi-level database, which is based on two complementary processes. The first component is a vast database of nearly two decades worth of manually completed determinations. These determinations are created when one of our Map Analysts examines the hard copy FIRM and renders a determination. The analyst who specializes in the specific geographic region involved may also use other resources from our extensive library to locate the specific structure on the FEMA map. These resources can include tax maps, plats, surveys, subdivision maps, lot and block information, section/township/range, aerial photographs, and legal descriptions. The second building block in our process is state-of-the-art Geographic Information Systems (GIS) technology, which is a computerized mapping approach that gives us a digitized data view of a geographic location. This technology allows us to process map revisions quickly and efficiently and serves as a built-in check and balance system for maintaining superior accuracy. 2. How quickly does First American fulfill requests for flood determinations? On a nationwide average, the vast majority of our determinations are returned to you instantaneously, with the remainder manually researched and returned in less than 24 hours. Our current national average exceeds an 86 percent instant response (90 percent on valid address only) with manually researched items completed in an average of 12 hours. (Our national average is comprised of residential properties only.) 3. What information does First American require in order to complete a flood determination? The information required to prepare an accurate flood zone determination is a correct and valid property address. Occasionally, we may require additional information such as the legal description, tax parcel number, tax identification number, and survey or site plan showing the physical location of all structures on the property. We utilize our expansive resource database to complete flood determinations prior to requesting any additional information, but we welcome any information that you have regarding the property. 4. What if we have questions about a specific flood determination request, a completed flood determination, or about our account? Because we know your time is valuable, our goal is to provide such flawless service so as to minimize any questions or concerns. Should you need to contact us, however, you’ll have immediate access to a friendly, knowledgeable Client Advocate who will answer your question or rectify the problem as quickly as possible. Your call is answered without complicated phone menus or endless on-hold waits. Best of all, because of their training and authority, our Client Advocates can usually resolve 80% of phone (800-447-1772), e-mail and FloodCert.com inquiries on the spot, with no additional calls or follow-up needed. We are available from 7 a.m. – 7 p.m. Central time, Monday through Friday. 5. What does First American do to assist its client when faced with a regulatory complaint or violation? If you are ever faced with a flood-related regulatory complaint or violation, please contact First American immediately. We encourage you to contact us through our Client Services Department, your Account Manager, or the Compliance Department. Because we take an active role in the resolution, the sooner we become involved in the process, the greater the likelihood that we can resolve the matter. We will work directly with you and the agency, commission, department, or other regulatory body to resolve the situation. If we are found to be in error and a fine is levied against you based upon an errant flood determination, then we will compensate you or pay the fine directly. 6. Explain how First American handles rush requests. What is the response time for a rush request? We understand that the need for rush service on a determination will arise from time to time. As a normal part of our customer service, we provide an expedited determination whenever the need arises. For an additional fee of $10 (ten dollars) we guarantee a turnaround time of four business hours. Since most flood determination requests are completed instantly, this added guarantee is seldom needed. If your Rush Determination is not completed within four (4) business hours or less from the time you placed the rush order, you are not billed the rush fee. 7. What if there is information in the loan file, such as a survey, which has a different flood zone than on the flood determination? The federal regulations specify that the lending institution has the ultimate responsibility to require flood insurance when applicable; thus it behooves the lender to review the flood determination along with any other loan documentation and to contact First American with any conflicting information. When this occurs, we will review the flood determination to confirm the property’s flood zone. Please also provide us with any conflicting documents, so we can respond directly to this information. Back to Top 11. FIRST AMERICAN'S LIFE OF LOAN SERVICE 1. What is First American’s Life-of-Loan service? In 1994, FEMA enacted the National Flood Insurance Reform Act of 1994, requiring borrowers to purchase flood insurance. More specifically, the law requires Federal agency lender regulators to develop policies to direct their federally regulated lenders not to make, increase, extend, or renew any loan on improved real estate located or to be located within a Special Flood Hazard Area in a community that participates in the National Flood Insurance Program unless the improved real estate or personal property securing the loan has flood insurance coverage for the life of the loan. First American’s Life-of-Loan service was created to help lenders satisfy these requirements. Simply knowing the property’s flood zone status at loan closing is not enough. Over time, FEMA’s flood maps may change. Topography transformations or even a community’s flood mitigation action can alter a property’s probability to flood. Be sure you know of those changes before it’s too late. Protect your investment by utilizing the industry’s most widely accepted and fully transferable life-of-loan determination. Here’s what we can do for you: We first determine if a structure on a mortgaged property lies within an SFHA on the date of determination. Then we track the property during the life of the loan for any flood map revisions, including Letters of Map Amendment and Revision that may change the structure’s insurance requirements. When a map is revised, we send you notifications for any affected loans along with a helpful summary report. Notices can be automatically uploaded into your servicing system or sent in electronic and/or hard copy format. 2. How and when are Life-of-Loan changes communicated to the lender? When a map is revised, we send notifications within 60 days for any affected loans along with a summary report. Notices can be sent in electronic or hard copy format or both. Changes can also be automatically uploaded into a loan servicing system. 3. How are borrowers notified when their flood zone status changes due to remapping? When a map change occurs, we send all borrower notifications directly to the lender or their third party partners either as an electronic or hard copy document. Lenders may choose to use these notifications to inform borrowers of any map changes that impact the flood zone status of their property. A summary report of the affected loans is also sent along with the notices. We can even arrange for changes to be automatically uploaded into the lender’s servicing system through a batch process. Back to Top 12. FIRST AMERICAN'S DISPUTE PROCEDURES 1. What if the borrower disagrees with the flood zone on the flood determination? It is not uncommon for other parties, such as borrowers, surveyors, community officials, realtors, insurance agents, builders, or appraisers to have differing opinions about a property’s flood zone designation. This can occur for a variety of reasons: (1) Reliance on information other than the Flood Insurance Rate Map, (2) Historical information that differs from the flood map, (3) Updated information not reflected on the flood map, (4) Different interpretations of the flood map, or (5) A resistance to paying for the required flood insurance. When a dispute over a flood zone determination occurs, a discussion of the methodology used to make the flood zone determination and a review of the flood map can often resolve the situation. By contacting First American, we will gladly assist in this review and hopefully aid in resolving the dispute. 2. What is First American’s process for reviewing and rechecking flood determinations? First American has an established dispute process whereby a flood determination is reviewed to confirm the property’s flood zone. You may initiate the process through FloodCert.com, by contacting our Client Services Department directly at (800) 447-1772, email or fax at (800) 447-9664. Along with the Flood Certification Number and address of the particular flood determination, please provide any documentation applicable to the property’s flood zone or structure location (e.g. a survey or an Elevation Certificate.) One of our Compliance Advisors will review the information and render a determination of the property’s flood zone. After the review, the Compliance Advisor will provide you with the results, and beyond this, will work directly with you, your customer or any other involved party (such as a surveyor or community official), so that everyone understands how the determinations was made. Hopefully, this will lead to a consensus on the results. Nearly all of our Compliance Advisors are Certified Floodplain Managers, which means they have the specialized training, experience and technical skills to handle these situations and to provide a resolution that satisfies everyone. 3. What is the turnaround time for the dispute process? You can expect to receive a response from a Compliance Advisor within 24 hours (one business day) from the time you initiate the dispute process. We recognize that occasionally you’ll need a faster response. Simply indicate that you would like to “RUSH” the dispute, and you will receive a response within four hours. 4. What if the borrower still questions the results of the flood determination even after the Dispute Process? If we confirm that the structure is in the Special Flood Hazard Area through our internal dispute process, yet the borrower still believes that we have not interpreted the flood map correctly, then the borrower, jointly with the lender, can request a Lender Determination Review through FEMA. The Lender Determination Review (LODR) is a process through which FEMA will determine if the Standard Flood Hazard Determination Form, which includes the flood zone determination used by the lender, is accurate. For example, if a lender is requiring flood insurance based upon a flood zone determination that states that the subject property is in the Special Flood Hazard Area (SFHA), then FEMA will confirm whether or not the property is indeed in the SFHA based upon the Flood Insurance Rate Map. After their review, FEMA will issue a Letter agreeing or disagreeing with the flood determination. The lender can rely on this FEMA letter to make a decision about the flood insurance requirement and to cancel an insurance policy. FEMA requires the following items for this process: (1) Letter signed by both the borrower and lender requesting the review, (2) Copy of the lender’s Standard Flood Hazard Determination Form, (3) Copy of the dated Notice to Borrower document, (4) Copy of the applicable flood map, (5) All documents used by the lender to complete the flood zone determination, and (6) Check or money order in the amount of $80.00 made payable to the NFIP. This request must be submitted within 45 days of the Notice to Borrower document. 5. What assistance can First American provide with the LODR process? As part of the request, FEMA requires all documents used by the lender to make the original flood determination. Please contact us to obtain copies of these documents; we can forward these documents directly to FEMA or to you. We will also be available to answer questions or discuss the determination, as needed. 6. What if the borrower believes that the map is wrong based upon the property’s elevation? Occasionally, the FIRMs will show the improvements on the property to be within the Special Flood Hazard Area when the property’s elevation is actually above the floodplain elevation. In these situations, the flood insurance requirement applies unless or until FEMA changes the property’s flood zone through a map amendment or map revision. If the property owner believes that the natural elevation of the land around the structure is above the floodplain elevation, then the property owner should consider applying for a Letter of Map Amendment (LOMA). Through this process, FEMA reviews technical data to determine if flood insurance should be required. If FEMA determines that the structure is above the floodplain elevation, then a “LOMA-Removal” will be issued by FEMA, and the federal flood insurance requirement will not apply. If the lender drops the flood insurance requirement, then the current flood insurance policy can be cancelled and a refund obtained. 7. What assistance can First American provide with the LOMA process? FEMA encourages property owners and communities to be involved in any amendments or revisions to its flood maps. First American is available to assist you through every step of this process. We can provide you with the LOMA application, a list of the required documentation and FEMA contact information. Much of this information is available in our Flood Compliance Kit. Once the application is completed and submitted to FEMA, we are available to answer any questions you or your customer may have. We can even contact FEMA or the engineering contractor reviewing the file for FEMA to follow up throughout the process. If you need us to, we can complete the application, compile the needed documentation, and submit the packet to FEMA for review on behalf of your customer. We will also follow-up with FEMA or the contractor throughout the review process. All we would need from you or your borrower is an Elevation Certificate, a recorded deed (if available), and a boundary survey (if available). While we cannot guarantee the results of FEMA’s review, we are here to support you and your borrower through the process. 8. Is there an additional fee for First American’s assistance with the LOMA process? First American does not charge a fee for this service. Our time and expertise is offered to you as part of the flood determination service we provide to you. Back to Top 13. FIRST AMERICAN'S DISASTER RECOVERY PLAN 1. What disaster recovery systems and processes are in place to ensure the integrity and continuity of the flood zone determination process? Rest assured that First American Flood Data Services has invested significant resources to establish a comprehensive Disaster Recovery Plan (DRP) and off-site Disaster Recovery Facility. This investment ensures that valued customers, like you, receive seamless service from us—regardless of any natural disasters or major disruptive events. The DRP outlines in great detail, our responses to a variety of disaster situations and provides for the continuity of our critical automated and manual business functions. Our off-site Disaster Recovery Facility is a “hot site,” which means it’s fully operational and ready for the transition of our operation at any time. In fact, the facility is used on a regular basis as our employee-training center. The 15,200 square-foot facility is fully outfitted with duplicate maps and file servers, inbound and outbound fax servers, employee workstations, a phone system and Internet connectivity. The FloodCert Internet Site utilizes the Internet BGP4 Protocol which allows for daily connectivity to FloodCert through both our Primary Facility as well as our Disaster Recovery Facility. There are redundant, load balanced Web Servers at both facilities. If our Primary Facility were to be disrupted for any reason, the DR location would simply become the primary portal for FloodCert. Activity on our critical file servers is mirrored in real-time on identical hardware. The off-site facility is located on a separate electricity grid and has an independent diesel generator that can provide electrical power indefinitely. That means our network and communications infrastructure is completely protected from electrical disruption. What’s more, the plan is formally reviewed semi-annually and is tested annually. During a test, telecommunications are rerouted to the off-site facility. All links to the primary site are cut. A partial staff, including customer service personnel, assembles at the off-site facility and establishes operations following the pre-planned procedures. At that time, actual live orders are received, processed and returned to our clients—all without an interruption in service. Our existing plan details procedures for emergency communication throughout the management team and employees, that includes: ·Management backup and succession ·Criteria to use when assessing business disruption ·Steps to redirect data processing operations to the backup site ·Instructions for resuming manual operations at the re-routed site Back to Top 14. FIRST AMERICAN'S ORDERING METHODS 1. What are your ordering options? The preferred method for receiving flood determination requests is through an electronic interface; however, we recognize the need for flexible applications and business technology that matches and complements your software and operations. Therefore, we provide customized solutions to provide the highest level of automation that is compatible with the technology utilized in each line of business. We maintain the most flexible assortment of production automation in the industry, which includes: ·FloodCert.com—our automated flood compliance ordering website ·Custom batch and real-time interface options ·Popular loan origination software ·Interfaces with vendor portals ·Industry Value Added Networks (VAN) ·Private label Internet options 2. Does First American have electronic interfaces available to order and receive flood zone determinations? First American offers various existing interface options, and we are prepared to develop new and custom solutions for our clients. We are continually building new interfaces to further expand our wide range of connectivity options. Some of our already established interfaces include real-time XML/SOAP interface technology, WebDav (an Internet-based interface) and more common FTP (regular, secured and dial-up) interface options, which is the most common way of connecting to us. We support numerous forms of data exchange, including traditional EDI using X.12 standards, and First American processes flood determination requests daily over a Value Added Network (VAN). Transmissions include various fixed and variable record formats transmitted over public and private networks and direct dialup. In addition to providing custom interfaces, our services are available through the Ellie Mae ePASS Business Center, Fannie Mae DU Connections, Ocwen RealTrans, and Alltel InterChange to name a few. We also have direct interfaces with several loan origination systems; some of our many connections include FiServ UniFi and FiServ easyLENDER, Calyx Point, Dynatek MORVision, 3t Systems Mortgage Cadence, MortgageFlex LoanQuest and RealEC. Various custom solutions are employed to accommodate lenders that own or have customized their Loan Origination System. Since we are always building and enhancing order interfaces to serve our client’s needs, please ask about systems or providers not listed here. The requirements of loan servicers are always managed effortlessly at First American. We provide servicing system uploads and other custom data transmissions for several loan servicers. We manage custom interfaces and routinely deliver data to Fidelity MSP and FiServ MortgageServ for numerous clients. In addition, First American continues to develop partnerships with the most recognized and successful settlement service portals. 3. What is the turnaround time for implementing new interfaces? The turnaround time for implementing interfaces depends on the level of customization requested by the client. First American does not charge fees for the development of client interfaces 4. How do I order multiple First American Products? You can order multiple First American products, such as flood zone determinations, appraisals, credit reports, home warranties, title, escrow, and other services through our secure Internet ordering site. A seamless interface between The First American Corporation family of companies allows you to order, receive, and monitor your requests in one place without duplicate data entry. Back to Top 15. FIRST AMERICAN’S FINANCIAL STRENGTH 1. How long has your company been providing flood zone determinations? While some of the nation's largest banks, loan servicers, credit unions, and insurance carriers use our products and services, we treat all our clients as valued customers, regardless of their size. Even with over 400 full-time employees serving more than 4,000 customers in over 10,000 ordering locations, we still believe in personalized service, courtesy and friendliness. We’ve been in the flood business since 1986, and part of the First American family of companies since 1995. Our technological capabilities and data resources advanced to a new level in 1999 when we acquired our best competitor, California-based Pinnacle Data Corporation. Then, in 2003, we acquired Transamerica’s flood service company, again expanding our automation capabilities and our flood information database. We take our leadership role in the flood data industry seriously. We’re actively involved with FEMA, the National Flood Insurance Program, and other public and private organizations. When we participate in these activities, we represent not only our company but also our customers, giving you a voice in the flood determination community. We’re also proud of our parent company: The First American Corporation (NYSE: FAF), the nation’s leading provider of real estate data. Like First American Flood Data Services, many other members of the First American family of companies command leading market shares in their respective industries. The companies operate within seven primary business segments: Title Insurance and Services, Specialty Insurance, Trust and Other Services, Mortgage Information, Property Information, Credit Information, Screening Information. With 29,000 employees in nearly 1,800 offices throughout the U.S. and abroad, First American has the size and infrastructure to serve major corporations—while maintaining a commitment to quality service and individual customer focus. 2. What is the financial strength of your company? The First American Corporation, a FORTUNE 500 company and the nation’s leading diversified provider of business information, supplies businesses and consumers with the information resources that affect the major economic events of people’s lives, such as getting a job; renting an apartment; buying a car, house, boat or airplane; securing a mortgage; opening or buying a business; and planning for retirement. The First American Family of Companies, many of which command leading market share positions in their respective industries, operate within seven primary business segments including: Title Information and Services, Specialty Insurance, Trust and Other Services, Mortgage Information, Property Information, Credit Information and Screening Information. With revenues of $6.21 billion in 2003, First American has nearly 29,000 employees in approximately 1,800 offices across the United States and abroad. Each one of our business segments leverage First American's advanced technology infrastructure designed to automate production and electronically speed delivery of information across the company's network and directly to its customers. 3. What is the financial strength of your guarantor and insurer? We retain a loss reserve to pay for losses according to the Indemnification provision of our Agreement. In addition to our reserve, we have a $15 million Errors & Omission policy through American International Group, Inc. A.M. Best rates First American's Errors & Omissions carrier an A++. Back to Top |
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