Message from the President
Exclusive Online Resource Provides Updates on NFIP Reforms
First American Implements New Security Standard
Prepare Your Portfolio Now for Map Changes Ahead
Mississippi Officials Call on First American for Geospatial Expertise
Fannie, Freddie Announce Property Insurance Changes
Alert Your Customers Now to “Grandfathering” Rules
eLOMA Now Available
Learning the Lingo
Upcoming Map Revisions
Ask the Experts
Coming Up: Meetings and Conferences
While we keep a watchful eye on this summer’s storm activity, here at First American Flood Data Services we’re also looking ahead to major developments scheduled for September. That’s when FEMA will release its most extensive group of map revisions ever. Here’s a snapshot illustrating the scope of these anticipated revisions:
In addition to the September revisions, in mid-January 2007 FEMA is expected to release new maps for Harris County, Texas. That revision alone could move as many as 70,000 properties from outside to inside the Special Flood Hazard Area.
These and other impending map changes are going to significantly affect our clients’ portfolios. The good news is that you have ample time to prepare, and that our Portfolio Services Department can assist you in a variety of ways. See the article below for recommended steps to ensure that your portfolio is in optimal condition to handle these map changes.
The upcoming map changes will also affect your customers’ flood insurance requirements. Don’t forget that we can serve as your resource for flood insurance as well as for elevation certificates, statistical reports and other data needs.
We’re also carefully monitoring developments in flood reform legislation. Our new Legislative Update page is designed not only to keep you abreast of what’s happening, but also to inform you about how the changes are likely to affect your business.
It’s definitely going to be a busy summer. Call on us to help keep your business running smoothly as you adapt to the changes ahead.
—Vicki Chenault
Over the past several months, we’ve kept you informed of the steps being taken in Washington, D.C. to reform the National Flood Insurance Program (NFIP) in the wake of Hurricane Katrina. The House and Senate have released separate versions of NFIP reform bills. The full House recently passed its version of the bill while the Senate version has been passed by its committee but has not yet been sent to the full chamber.
We realize that legislation such as this directly impacts you and your business. To help keep you up to date on activity in Washington and around the country, we are launching a Legislative Update section under “Client Resources” on FloodCert.com. This resource will include summaries of pending Congressional bills that relate to the nation's flood program; a step-by-step breakdown of the legislative process, complete with definitions of key terms; and a section focusing on state-level legislation that could have broader implications.
Also, don’t forget to sign up for our Industry News Alerts. Subscribers will receive email updates as critical legislation moves toward passage.
We hope you find this new online resource informative and we invite your comments and questions.
In order to conform to the higher security standards being implemented in the financial industry, First American Flood Data Services will discontinue support of the 40-bit and 56-bit SSL encryption protocols in mid-July. All secure communications will require at least 128-bit encryption.
“This step will create an exponentially more secure data environment,” says Glenn Kronschnabl, chief technology officer of First American Flood Data Services. “Since most Web browsers and SOAP user agents already employ the 128-bit encryption technology, the change will be transparent to most of our clients.”
To allow for client testing, First American has already discontinued the low security encryption protocol on our beta testing portals, beta.floodcert.com and betasoap.floodcert.com. Clients are strongly encouraged to test their application and browser communications with these FloodCert beta portals as soon as possible to confirm that the higher encryption standard won’t create any problems with their production traffic.
If you have any questions about this change or need help testing, please contact your account manager or our Information Systems Help Desk at (800) 526-8778.
As FEMA readies massive flood map revisions for release in September, First American’s Portfolio Services department offers a variety of ways to help you prepare for the impact of the changes. “We can work with our customers to optimize their portfolios so they can receive the changes with a minimum of disruption,” says Portfolio Services director Christine Merrigan. She suggests the following steps you can take now:
If you would like to discuss these or other ways to prepare for the upcoming revisions, contact our Portfolio Services department at (800) 447-1772, x4787.
First American Flood Data Services has teamed up with a partner in Mississippi to support a new state-sponsored program to help residents repair and rebuild homes flooded by Hurricane Katrina. Under the new program, eligible homeowners may receive a one-time grant payment up to $150,000 for flood damages not covered by insurance or FEMA grants.
To be eligible for the funds, flooded properties in Hancock, Harrison and Jackson Counties must be owner-occupied and located outside the Special Flood Hazard Area (SFHA). To assist the program’s administrators in identifying eligible properties, First American created a database that identified all properties in the three counties that met the requirements. The analysis combined digital parcel data, FEMA floodplain boundaries, on-site information about the extent of flooding, and property ownership data. When necessary, aerial imagery was used to analyze properties that were partially flooded to determine whether the structures were affected.
Homeowners receiving grant payments must agree to building code, flood insurance and elevation requirements for their properties.
Recent increases in insurance premiums in some parts of the country are prompting many homeowners to choose higher deductibles. In response, Fannie Mae and Freddie Mac have announced a number of hazard-related policy changes.
Fannie Mae is urging sellers, servicers and insurance agents to advise property owners to carefully weigh premium costs and deductibles against the potential cost of repair in the event of a loss. The agency’s most recent policy changes, effective May 25, are designed to help lower insurance costs for homeowners. As a result of the changes, Fannie Mae:
For details of all these changes, see Fannie Mae’s Announcement 06-05.
Freddie Mac’s revised guidelines regarding deductibles are designed to help more borrowers qualify for lower mortgage rates in the wake of the recent hurricanes. The new guidelines are:
The changes are explained in detail in Freddie Mac’s May 30 bulletin.
Given the magnitude of FEMA map revisions slated for late 2006 and early 2007, understanding the National Flood Insurance Program’s “grandfathering” provision is more critical than ever. As the map changes take effect, many of your customers could be eligible for savings on insurance premiums, but only if they have flood insurance coverage in place before the effective date of the new map affecting their property.
Grandfathering enables certain flood insurance policyholders to obtain favorable premium rates even though their property has been remapped into a higher-risk—and thus higher-premium—-flood zone. How grandfathering works for a given property depends on several key questions:
Example: For pre-FIRM structures with flood coverage in place prior to the FEMA map change, the policyholder is eligible for premium rates based on the previous flood zone and elevation rather than on the new map—but only if continuous flood coverage has been maintained.
Many properties not currently in Special Flood Hazard Areas will be “in” on the new maps, resulting in higher insurance premiums. For your customers, the key to benefiting from grandfathering lies in having flood coverage in place prior to the map change. Encourage your customers to purchase flood insurance now so that they can take full advantage of grandfathering if they’re affected by a new map for their area.
First American’s flood insurance specialists can answer questions and assist customers in obtaining the documentation required for grandfathering. For more information, call (800) 447-1772, x3732/3892, or email rkleine@firstam.com.
Earlier this month FEMA launched eLOMA, a Web-based application that enables qualified users to submit simple Letter of Map Amendment (LOMA) requests to FEMA online and receive a determination in minutes. In the past, because of manual processing, obtaining a LOMA took up to 60 days, provided all required documentation was on file. Through the use of eLOMA, licensed land surveyors and professional engineers can now obtain a determination in the time it takes to enter the required information online.
The initial version of eLOMA will be able to process requests pertaining to existing single residential structures or properties, provided no fill has been added to raise the elevation. Approximately half of the LOMAs processed annually—about 10,000—meet the criteria for eLOMAs.
To use eLOMA, surveyors and engineers must set up an account using their individual license certification information. Once registered, the user can log into eLOMA and access the service.
FEMA’s map modernization program is going to have a sweeping impact on many industry sectors. Here’s a rundown on some mapping terminology excerpted from FEMA’s Flood Insurance Rate Map glossary.
Base map—Map of the community that depicts cultural features (roads, railroads, bridges, dams, culverts, etc.), drainage features, and the corporate limits.
Buffer zone—An area of specified distance (radius) around a map item or items.
Data layer—Refers to data having similar characteristics being contained in the same plane or overlay (e.g., roads, rivers). Usually information contained in a data layer is related and is designed to be used with other layers.
Digital Flood Insurance Rate Map (DFIRM) —A compilation of all digital data required to create the hardcopy FIRM, including base map information, graphics, text, shading, and other geographic and graphic data. Generally produced in a countywide format, DFIRMS are the official basis for implementing NFIP regulations and requirements for a specific community.
Flood Insurance Study (FIS) —An examination, evaluation, and determination of the flood hazards, and if appropriate, the corresponding water-surface elevations.
Polygon—A two-dimensional figure with three or more sides intersecting at an equal number of points. In Geographic Information Systems terminology, a polygon is simply an area.
Thematic layer—A data layer containing selected information relating to a specific theme, such as soils, vegetation, land use, etc.
Need a flood-related term defined? Submit it to thehighground@flooddata.com and we’ll include it in a future issue.
FEMA’s schedule of map revisions calls for new flood maps in Wheeling, West Virginia July 7 and Sonoma County, California on September 6. Otherwise, the calendar for the remainder of the summer is fairly light, with revisions mainly in small communities around the country.
As reported last month, the deluge comes in the last two weeks of September. Plans to issue new maps for more than 40 counties across the nation include the following:
We expect this set of map revisions to be unprecedented in terms of the number of properties potentially affected. We have already begun our preparations for handling the large volume and will update you with more specific information as we get closer to that time.
The length of time that First American requires to notify you of which loans are affected by map changes depends on the number of properties covered by a revision and the complexity of the changes in floodplain boundaries. You should expect to see many of the notifications from these upcoming map revisions shortly after the effective date of the new maps. Some properties require more extensive manual research and may take longer, but you should receive all notifications for this summer’s revisions within approximately 45 days of the effective date.
For a full list of upcoming FEMA map revisions, visit our Client Resources page on FloodCert.com.
Q. Due to a recent FEMA map revision, a property located in the Coastal Barrier Resources System (CBRS) that was formerly in Zone X is now in Zone AE, a Special Flood Hazard Area (SFHA). According to the regulations, flood insurance would typically be required because the community participates in the NFIP, but flood insurance is not available through the NFIP because the building on the property was built after the CBRS designation date. Will the NFIP's “grandfathering” rules help in this situation?
A. No. The NFIP’s grandfathering rules affect neither the flood insurance purchase requirement nor the availability of federal flood insurance. In general, grandfathering simply provides access to lower premium rates for loyal flood insurance customers when remapping puts their property in a higher risk zone that would normally result in increased premiums. (See article above.)
As you pointed out, flood insurance is not even available for this property because of the CBRS designation, so grandfathering would not apply anyway. Most expenditures of federal funds—including the provision of flood insurance—are prohibited in CBRS areas in order to protect vulnerable coastlines from development. On the other hand, if this building had been constructed prior to the CBRS designation date, then federal flood insurance might be available and grandfathering rules might apply.
Although the federal flood insurance requirement does not apply here because coverage is not available through the NFIP, the lender could still require flood insurance on the loan. In that case the property owner might choose to seek coverage from a private carrier outside the NFIP.
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If you have an event you'd like us to list in a future issue of The High Ground, contact us at thehighground@flooddata.com.