Lenders are required to complete a Standard Flood Hazard Determination (SFHD) form whenever they make, increase, extend or renew a mortgage, home equity, home improvement, commercial or farm credit loan to determine if the building or manufactured (mobile) home is in an SFHA. It is the Federal agency’s or the lenders responsibility to check the current Flood Insurance Rate Map (FIRM) to determine if the building is in a SFHA. Copies of the FIRM are available for review in most local government buildings or planning departments and ours is on display in our municipal building. Lenders may also have copies or they use a flood zone determination company to provide the SFHD form.
If the building is in a Special Flood Hazard Area, the Federal agency or lender is required by law to require the recipient to purchase a flood insurance policy on the building. Federal regulations require the recipient to purchase a flood insurance policy on the building. Federal regulations require building coverage equal to the amount of loan (excluding appraised value of the land) or the maximum amount of insurance available from the NFIP, whichever is less. The maximum amount available for a single-family residence is $250,000.00. Government sponsored enterprises, such as Fannie Mae and Freddie Mac, have stricter requirements.
The mandatory purchase requirement does not affect loans or financial assistance for items that are not covered by a flood insurance policy, such as vehicles, business expenses, landscaping, and vacant lots. It does not affect loans for buildings that are not in the SFHA, even though a portion of the lot may be. While not mandated by law, a lender may require a flood insurance policy, as a condition of a loan, for a property in any zone on a FIRM.
If a person feels that a SFHD form incorrectly places the property in the SFHA, he or she may request a Letter of Determination Review from FEMA. This must be submitted within 45 days of the determination. More information can be found at http://www.fema.gov/national-flood-insurance-program