Building on a Floodplain

For virtually every mortgage transaction involving a structure in the U.S., the lender reviews the current NFIP maps for the community in which the property is located to determine its location relative to the published Special Flood Hazard Area (SFHA) and completes the Standard Flood Hazard Determination Form (SFHDF). If the lender determines that the structure is indeed located within the SFHA and the community is participating in the NFIP, the borrower is then notified that flood insurance will be required as a condition of receiving the loan. A similar review is completed whenever a loan is sold on the secondary loan market or perhaps when the lender completes a routine review of its mortgage portfolio.

Flood Insurance Requirement

Lenders, on their own initiative, may also require the purchase of flood insurance even if a building is located outside an SFHA. A decision to require coverage under such circumstances is not compelled by the statute, but is founded on the contractual relationship between the parties. Lenders have the prerogative to require flood insurance to protect their investments, provided that they have reserved that option in their mortgage loan document.

When a structure located in the floodplain has been properly elevated to the regulatory flood protection elevation (RFPE) this does not automatically exempt the site from flood insurance. The owner may request FEMA to waive the requirement for flood insurance for a federally insured or financed loan. FEMA can do this by issuing what is called a letter of map revision (LOMR) once proper documentation has been provided that the structure's lowest floor (including basement) and lowest adjacent grade have been elevated on fill to the 1% chance flood level. FEMA can also issue a letter of map amendment (LOMA), waiving the mandatory insurance requirement, to those structures inadvertently or incorrectly mapped in the 1% chance floodplain. Applications for LOMR and LOMA are available at the Sherburne County Zoning Office.