National Flood Insurance Program 
Mandatory Purchase of 
Flood Insurance Guidelines 
September 2007 

CONTENTS
Preface.....................................................................................................................................vii 
Highlights of the 2007 Edition.................................................................................................ix 
Section A. Introduction 
1. Background of the National Flood Insurance Program..................................................1 
a. History............................................................................................................................1 
b. Statutory Authority .........................................................................................................1 
c. Administration ................................................................................................................1 
2. Establishment of the NFIP  National Flood Insurance Act of 1968 ...........................1 
a. Insurance Protection........................................................................................................1 
b. Hazard Mitigation ...........................................................................................................2
3. Introduction of the Mandatory Flood Insurance Purchase Requirement  
Flood Disaster Protection Act of 1973...............................................................................2 
4. Strengthening the Mandatory Purchase Requirement  
National Flood Insurance Reform Act of 1994.................................................................3 
a. Entities Encompassed by the Law ..................................................................................3 
b. Lending Agency Regulations..........................................................................................4 
c. Designated Loans............................................................................................................4 
d. Insurance Required at Loan Closing...............................................................................5 
e. Life-of-Loan Insurance Coverage...................................................................................5 
f. Lender Responsibilities...................................................................................................5 
g. Disaster Assistance..........................................................................................................7 
5. Operation of the NFIP ........................................................................................................7
Section B. Coverage Availability 
1. Participating Communities..................................................................................................9
a. Community Ordinances.....................................................................................................9 
b. Studies and Maps.............................................................................................................10 
c. Determining Location of a Building................................................................................11 
(1) Significance of a Buildings Location.......................................................................11 
(2) Responsibility in Determining a Buildings Location...............................................11 
(3) Effect of Grandfathering on Flood Zone Determination...........................................12 
(4) Flood Zone Determination Fee Charged by Lender..................................................13 
d. Letters of Map Change (LOMCs) and Appeal Options ..................................................14 
(1) Letter of Determination Review (LODR) .................................................................14 
(2) Letter of Map Amendment (LOMA).........................................................................17 
(3) Letter of Map Revision (LOMR) ..............................................................................17 
(4) Community-Initiated Map Revisions........................................................................18 
(5) Map Availability........................................................................................................18
2. Non-Participating Communities and Restricted Coverage Areas.................................19 
a. Regulated Lending Permitted ..........................................................................................19 
b. Federal Financial Assistance and Disaster Assistance Limited.......................................20 
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c. Notification of the Unavailability of Federal Disaster Assistance .................................. 20 
d. Buildings Ineligible for NFIP Coverage .........................................................................20 
(1) Underwriting Restrictions ......................................................................................... 20 
(2) CBRS Areas and OPAs.............................................................................................21 
(3) Buildings in Violation of State or Local Laws..........................................................22 
Section C. General Mandatory Purchase Provisions 
1. Entities Encompassed by the Law...................................................................................23 
a. Federally Regulated Lenders ........................................................................................23 
b. Government-Sponsored Enterprises ............................................................................. 25 
c. Federal Agency Lenders...............................................................................................26 
2. Specific Provisions of the Law .........................................................................................26 
a. Limits Available............................................................................................................26 
(1) Land and Land Values Not Insurable ..................................................................... 27 
(2) Calculating Coverage..............................................................................................27 
(3) Loss Payments ........................................................................................................28 
(4) Deductible...............................................................................................................29
(5) No Coverage if Land Loan Only ............................................................................ 29 
(6) Low-Value Building on High-Value Land ............................................................. 29 
(7) Buildings in the Course of Construction................................................................. 30 
(8) Manufactured (Mobile) Homes/Travel Trailers......................................................31 
(9) Personal Property....................................................................................................31 
b. Underinsured Buildings................................................................................................32 
c. Home Equity and Second Mortgages ...........................................................................32 
d. Notification Requirements............................................................................................34 
(1) Notice of Special Flood Hazard and 
Availability of Federal Disaster Relief Assistance ................................................34 
(2) Notification of Change of Servicer.........................................................................35 
 (3) Expiration/Renewal Notice.....................................................................................36 
e. Standard Flood Hazard Determination Form................................................................36 
 (1) Determination Process ............................................................................................ 37 
(2) Instructions for Using the SFHDF..........................................................................38 
f. Waiting Period and Exceptions.....................................................................................38 
(1) Coverage Obtained in Conjunction with a Loan.....................................................38 
 (2) Assignment of Policy..............................................................................................39 
g. Escrow Requirements ...................................................................................................39 
(1) Real Estate Settlement Procedures Act...................................................................39 
 (2) Applicability ........................................................................................................... 39 
 (3) Escrow Exclusions..................................................................................................40 
h. Force Placement............................................................................................................40 
 (1) Authority.................................................................................................................40 
 (2) Applicability ........................................................................................................... 41 
(3) MPPP Method of Placement...................................................................................42 
 (4) Standard NFIP Policy ............................................................................................. 42 
 (5) Private Flood Insurance .......................................................................................... 42 
i. Exceptions.....................................................................................................................42 
 (1) State-Owned Property.............................................................................................42 
 (2) Small Loan..............................................................................................................43 
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Section D. Condominiums, Cooperatives, Timeshares 
1. Condominium Association Responsibilities and Statutory Requirements..................45 
a. Residential Condominium Building Association Policy (RCBAP)..............................45 
(1) Statutory Requirements...........................................................................................46 
(2) Evidence of Compliance.........................................................................................46 
(3) Coverage .................................................................................................................47 
(4) Policy Limits...........................................................................................................47 
(5) Valuation.................................................................................................................47 
(6) Coinsurance Provision ............................................................................................47 
(7) Assessments ............................................................................................................48
b. Dwelling Form Policy...................................................................................................48 
(1) Unit Owners Building Coverage............................................................................48 
(2) Unit Owners Personal Property Coverage.............................................................49 
(3) Loss Assessment Coverage.....................................................................................49 
c. General Property Form Policy ......................................................................................50 
2. Cooperative Associations..................................................................................................50
3. Timeshares........................................................................................................................50 
4. Homeowners Associations................................................................................................50 
5. Secondary Market.............................................................................................................51 
a. Fannie Mae....................................................................................................................51 
b. Freddie Mac ..................................................................................................................51 
Section E. Implementation of Key Provisions 
1. Tripwires...........................................................................................................................53 
a. Loan Activity ................................................................................................................53 
b. Loan Transfer or Purchase............................................................................................53 
c. Portfolio Review ...........................................................................................................55 
2. Safety and Soundness........................................................................................................56 
3. Table Funding ...................................................................................................................56 
4. Impact on Servicers...........................................................................................................57 
5. Private Flood Insurance ...................................................................................................57 
a. Licensure......................................................................................................................58 
b. Surplus Lines Recognition (Non-Residential Commercial) .........................................58 
c. Requirement of 45-Day Cancellation/Non-Renewal Notice.........................................58 
d. Breadth of Policy Coverage..........................................................................................58 
e. Strength of Mortgage Interest Clause ...........................................................................58 
f. Legal Recourse..............................................................................................................58 
6. Regulatory Overview........................................................................................................58 
a. Regulatory Examinations..............................................................................................58 
b. Regulatory Penalties .....................................................................................................59
7. Civil Liability.....................................................................................................................60 
Appendix 1. Legal References.............................................................................................. 1-1 
Appendix 2. FDIC Regulations ............................................................................................ 2-1 
Appendix 3. Standard Flood Hazard Determination Form.............................................. 3-1 
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Appendix 4. Notice Requirements of the Statute ................................................................4-1 
Appendix 5. Flood Insurance Resources..............................................................................5-1 
Appendix 6. 30-Day Waiting Period.....................................................................................6-1 
Appendix 7. MPPP Guidelines and Requirements .............................................................7-1 
Glossary ............................................................................................................................GLS 1 
Index..................................................................................................................................IND 1 
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ILLUSTRATIONS 
Mandatory Purchase at Loan Origination...................................................................................6 
NFIP Operations and Functional Relationships..........................................................................8 
Example of RCBAP Coinsurance Penalty................................................................................48 
RCBAP Loss Settlement Formula ............................................................................................48 
Example of Adequate Amount of Insurance, Avoiding RCBAP Coinsurance Penalty............48 
Tripwires During Life of Loan..................................................................................................54 
Standard Flood Hazard Determination Form....................................................3-1 (Appendix 3) 
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TABLES 
NFIP Maximum Limits of Coverage........................................................................................26 
Flood Insurance Resources ............................................................................... 5-1 (Appendix 5) 
Mortgage Portfolio Protection Program Rate and 
Increased Cost of Compliance (ICC) Table......................................................7-5 (Appendix 7) 
vi 

PREFACE
The Federal Emergency Management Agency (FEMA) is pleased to provide you with this 
revised 2007 edition of the Mandatory Purchase of Flood Insurance Guidelines. 
The Mandatory Purchase of Flood Insurance Guidelines booklet provides guidance to the 
federally regulated lending industry for implementing the mandatory purchase provisions of 
the National Flood Insurance Reform Act of 1994 and other key legislation that governs the 
National Flood Insurance Program (NFIP). The mandatory purchase law directed the Federal 
agency lender regulators and Government-Sponsored Enterprises (GSEs) to develop and 
adopt regulations requiring lenders subject to their jurisdiction not to make, increase, renew, 
or extend any loan on applicable property unless flood insurance is purchased and maintained 
to protect that property securing loans in high flood risk areas. 
This document was designed to promote greater uniformity and understanding of the 
requirements of the law among Federal agency lender regulators, GSEs, Federal agency 
lenders, and applicable lending institutions. These guidelines are intended to augment, not 
replace, a review of the applicable statutes and regulations, and are not intended to provide 
legal guidance. 
Implementation of the mandatory flood insurance purchase requirements as explained in these 
guidelines is the responsibility of the various Federal agencies that oversee lenders. Each 
Federal lending regulator and GSE has the responsibility to issue its own regulations to 
implement the statutory requirements. 
The authority of FEMA is limited to administering the NFIP, which enables property owners 
in participating communities to purchase federally backed flood insurance. FEMA does not 
have statutory responsibility for enforcing the mandate to purchase flood insurance. 
This 2007 edition of the guidelines clarifies some of the complex issues that have arisen since 
the 1999 edition and incorporates industry best practices and lessons learned for 
implementing statutory requirements. A supplement may be added to capture subsequent 
changes that may result from future legislation. 
Some of the highlights of this edition are described on page ix. 
vii 

viii

HIGHLIGHTS OF THE 2007 EDITION 
Includes discussion of the legislative history of the NFIP and describes the federally regulated 
lending agencies and the types of lending institutions they each supervise. Incorporates 
flowchart illustrating mandatory purchase process at loan origination. (Section A) 
Includes link to information about the NFIP and levees. Clarifies processing information for 
Letters of Map Change. (Section B) 
Explains options for purchasing coverage for buildings in the course of construction. Specifies 
that there is no 30-day waiting period for this coverage. (Section C) 
Includes the Program change that effective October 1, 2007, the Declarations Page of each 
Residential Condominium Building Association Policy (RCBAP) issued or renewed must 
show the buildings Replacement Cost Value (RCV) and the number of units within that 
building. (Section D) 
Recommends 100-percent RCV for RCBAP coverage. Clarifies application of coinsurance 
penalties and loss assessments. Updates deductible information for Government-Sponsored 
Enterprises. (Section D) 
Incorporates flowchart describing tripwires during the life of loan. Expands discussion of 
regulatory penalties. (Section E) 
Updates language referencing NFIP history and legal citations. (Appendix 1) 
Provides version of federally regulated agency lender regulations. (Appendix 2) 
Includes most current Standard Flood Hazard Determination Form. (Appendix 3) 
Provides two separate Sample Notices of Special Flood Hazard and Availability of Federal 
Disaster Relief Assistance  one for participating communities and one for non-participating 
communities. (Appendix 4) 
Provides contact information for federally regulated lending agencies, GSEs, and flood-
related resources. (Appendix 5) 
Expands waiting period discussion to correspond with the NFIP Flood Insurance Manual. 
(Appendix 6) 
Updates the Mortgage Portfolio Protection Program information. (Appendix 7) 
Updates the Glossary for consistency with the Flood Insurance Manual. (GLS) 
Expands the Index. (IND) 
ix 

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SECTION A 
INTRODUCTION 
1. Background of the National Flood 
Insurance Program 
a. History 
Flooding has long been the costliest and 
most devastating disaster in the United 
States. For decades, the national response to 
flood disasters was generally limited to 
constructing flood-control works such as 
dams, levees, seawalls, and the like, and 
providing disaster relief to flood victims. 
This approach did not reduce losses, nor did 
it discourage unwise development. In 
addition, building techniques to reduce flood 
damage were often overlooked. To 
compound the problem, the public generally 
could not buy flood coverage from 
insurance companies, which were largely 
unwilling to underwrite and bear the risk of 
flood because of its catastrophic nature. 
In the face of mounting flood losses and 
escalating costs of disaster relief to the 
general taxpayers, the U.S. Congress created 
the National Flood Insurance Program 
(NFIP). The intent of Congress was to 
reduce future flood damage through 
community floodplain management ordinances, and provide protection for property 
owners against potential losses through a 
Federal insurance mechanism that requires a 
premium to be paid for the protection. 
b. Statutory Authority 
Key legislation that governs the NFIP 
includes: 
 The National Flood Insurance Act of 
1968 (established the NFIP) 
 The Flood Disaster Protection Act of 
1973 (introduced the mandatory 
purchase provisions) 
 The National Flood Insurance Reform 
Act of 1994 (strengthened the mandatory 
purchase provisions of the 1973 Act) 
 The Flood Insurance Reform Act of 
2004 (focused on severe repetitive loss 
properties and miscellaneous topics that 
did not affect the requirement to 
purchase flood insurance). 
Citations referring to the statutory authority 
of the program are found in Appendix 1, 
Legal References. 
c. Administration 
The NFIP is administered by the Mitigation 
Division of the Federal Emergency Management Agency (FEMA), a component of the 
U.S. Department of Homeland Security (DHS). 
2. Establishment of the NFIP  
National Flood Insurance Act of 1968 
Through the National Flood Insurance Act of 
1968 (42 U.S.C. 4001), Congress authorized 
the NFIP, which provided an opportunity for 
property owners to purchase flood insurance 
protection made available by the Federal 
Government for buildings and their contents. 
The NFIP combines the concepts of 
insurance protection and hazard mitigation. 
This program provides an incentive for 
communities to adopt floodplain management 
ordinances to mitigate the effects of flooding 
on new and existing construction. 
a. Insurance Protection 
The 1968 Act made federally backed flood 
insurance available to owners of improved 
real estate or manufactured (mobile) homes 
located in low-to-moderate and high flood 
risk areas if their community participated in 
the NFIP. 
1 Section A. Introduction 

The Act defined improved real estate as real 
estate upon which a building is located. 
Under the NFIP, this means a walled and 
roofed building or a building in the course 
of construction that qualifies for insurance 
coverage. The term improved real 
property, as used throughout these 
guidelines, includes manufactured (mobile) 
homes, as defined in the NFIPs Standard 
Flood Insurance Policy (SFIP). 
b. Hazard Mitigation 
The 1968 Act adopted a community 
approach to flood hazard mitigation. The 
law described two ways for a community to 
establish its eligibility to participate in the 
NFIP: 
 By adopting minimum regulatory 
standards in accordance with FEMA 
floodplain management guidelines, 
which help to save lives and reduce 
flood damage to property. 
 By enforcing its own regulations to 
ensure that new construction and 
substantial improvements to existing 
buildings within identified high flood 
risk areas called Special Flood Hazard 
Areas (SFHAs) are designed to 
minimize future flood damage. 
If a community does not participate in the 
program, property owners in that 
jurisdiction are not able to purchase 
federally backed flood insurance. Also, 
Federal grants, loans, disaster assistance, 
and Federal mortgage insurance are 
unavailable for the acquisition or 
construction of structures located or to be 
located in SFHAs shown on the Flood 
Insurance Rate Maps (FIRMs). 
Similarly, if a community does not 
participate in the program, property owners 
are not subject to Federal requirements of 
mandatory flood insurance. However, a 
lender is still required to inspect any flood 
maps to determine flood hazard risk and 
provide notice of such risk. A lender may 
require a borrower to obtain non-federally 
backed private flood insurance, if available, 
even in the absence of a Federal mandatory 
purchase requirement. 
An eligible community is a political 
subdivision with the authority to enact 
regulations in SFHAs. An SFHA is an area 
within a floodplain that has a 1-percent or 
greater chance of a flood occurring in any 
given year. SFHAs are delineated on flood 
maps issued by FEMA for individual 
communities. These high flood risk zones 
are represented on the flood maps by the 
darkly shaded areas with zone designations 
that include the letter A or V. Eligible 
communities that take the steps outlined 
above become NFIP participating communities. 
The 1968 Act laid a solid foundation for 
community mitigation of flood risks. 
However, most property owners still were 
not buying flood insurance protection, and 
expensive disaster assistance payouts 
continued. 
3. Introduction of the Mandatory Flood 
Insurance Purchase Requirement  
Flood Disaster Protection Act of 1973 
From 1968 until the adoption of the Flood 
Disaster Protection Act of 1973, the 
purchase of flood insurance was voluntary. 
However, the 1973 Act mandated flood 
insurance coverage for many properties. For 
the first time, federally regulated lending 
institutions could not make, increase, 
extend, or renew any loan secured by 
improved real property located in an SFHA 
in a participating community unless the 
secured building and any personal property 
securing the loan were covered for the life 
of the loan by a flood insurance policy. This 
measure was necessary because, after major 
flooding disasters, it became evident that 
relatively few individuals in eligible 
Section A. Introduction 2 

communities who sustained flood damage 
had purchased flood insurance. 
This general low level of coverage persisted 
for various reasons, including the following: 
 Some homeowners believed that they 
simply could not afford the cost of flood 
insurance in addition to mortgage 
payments and homeowners insurance. 
 Federally regulated lending institutions 
often were relaxed in complying with 
the mandatory purchase provision 
without the sanction of a penalty. 
 Homeowners who purchased flood 
insurance at the origination of their 
mortgages often allowed their policies to 
lapse. 
4. Strengthening of the Mandatory 
Purchase Requirement  National 
Flood Insurance Reform Act of 1994 
The National Flood Insurance Reform Act 
of 1994 (the 1994 Reform Act) is part of 
Title V of the Riegle Community 
Development and Regulatory Improvement 
Act of 1994 and amended 42 U.S.C. 4001 
et seq. The 1994 Reform Act imposed 
significant new obligations on lenders and 
servicers and tightened the requirement for 
the receipt of disaster assistance. 
After the multibillion-dollar flood damage in 
the Midwest during the summer of 1993, 
Congress revisited the mandatory purchase 
law and enacted the 1994 Reform Act. The 
reasons for the Reform Act included the 
NFIPs low reserves, resulting from a series 
of storms, as well as a low level of 
participation among eligible property 
owners. At that time, it was estimated that 
slightly more than 2 million of the 10 
million households then identified in SFHAs 
were covered by flood insurance. 
The 1994 Reform Act amended the previous 
law to strengthen compliance and ensure 
that flood insurance is purchased and 
maintained for the term of the loan by 
adding the following requirements: 
 Established the requirement to escrow 
flood insurance premiums when 
escrowing for other purposes; 
 Provided statutory authority and 
requirement for lenders and servicers to 
force place coverage when it is determined that flood insurance is inadequate 
or non-existent; 
 Provided enhanced flood hazard notice 
requirements; 
 Set forth new authority for lenders to 
charge reasonable fees for determining 
whether a property is located in an 
SFHA; and 
 Established other provisions necessary 
to implement the 1994 Reform Act. 
The 1994 legislation contained important 
reforms to improve the financial condition 
of the NFIP. A primary objective was to 
strengthen compliance with the mandatory 
purchase requirements by lenders, servicers, 
and secondary-market purchasers, and thus 
increase participation nationwide by owners 
of eligible properties in high flood risk 
areas. The ultimate goals were to provide 
additional income for the National Flood 
Insurance Fund and decrease the financial 
impact of flooding to the Federal 
Government, taxpayers, and citizens in areas 
most prone to flooding. 
a. Entities Encompassed by the Law 
The 1994 Reform Act amended 4012a of 
42 U.S.C. to address flood insurance 
purchase and strengthen compliance by 
adding the five requirements listed above. 
3 Section A. Introduction 

The essential part of the compliance 
provision is contained in 4012a(b), which 
addresses three kinds of lenders: 
 Federally Regulated Lenders 
 Government-Sponsored Enterprises 
(GSEs) for Housing 
 Federal Agency Lenders. 
The law focuses on compliance with the 
mandatory purchase requirement as the 
responsibility of federally regulated private 
lenders and GSEs that purchase loans in the 
secondary market. These entities must 
ensure that a building or manufactured 
(mobile) home and any applicable personal 
property securing a loan in an SFHA are 
covered by adequate flood insurance for the 
term of the loan. 
b. Lending Agency Regulations 
Although the intent of the law is to require 
borrowers to purchase flood insurance, the 
requirements are directed to federally 
regulated and federally insured lenders and 
to secondary-market entities involved in 
mortgage loan transactions. Agencies that 
supervise federally regulated lenders 
include: 
 Board of Governors of the Federal 
Reserve System (FRS) (State-chartered 
banks that are members of the FRS) 
 Office of the Comptroller of the 
Currency (OCC) (Nationally chartered 
banks) 
 Office of Thrift Supervision (OTS) 
(Nationally chartered thrift institutions) 
 Federal Deposit Insurance Corporation 
(FDIC) (State-chartered banks that are 
not members of the FRS) 
 National Credit Union Administration 
(NCUA) (Nationally chartered credit 
unions) 
 Farm Credit Administration (FCA) 
(Institutions that make up the Farm 
Credit System). 
The flood insurance requirements do not 
apply to lenders or servicers that are not 
federally regulated and that do not sell loans 
to the Federal National Mortgage Association (Fannie Mae) and the Federal Home 
Loan Mortgage Corporation (Freddie Mac) 
or other GSEs. 
The law requires Federal financial 
regulatory agencies to develop regulations 
that direct their federally regulated lenders 
not to make, increase, extend, or renew any 
loan on applicable property unless flood 
insurance is purchased. The affected 
agencies issued substantially similar joint 
final regulations in 1996; a version of the 
regulations is included in Appendix 2, FDIC 
Regulations. 
c. Designated Loans 
The 1994 Reform Acts mandatory purchase 
requirement applies to all federally related 
loans outstanding on or after the date of the 
legislations enactment, September 23, 
1994. Each instance of making, increasing, 
extending, or renewing a designated 
loana loan secured by a building or 
manufactured (mobile) home located or to 
be located in an SFHA, where flood 
insurance is available under the 1968 Act 
serves as a tripwire of sorts for compliance 
with the mandatory flood insurance 
purchase requirements. In the modern 
mortgage marketplace, this approach makes 
compliance by lenders increasingly more 
likely, as borrowers obtain new loans on 
existing buildings or refinance existing 
loans. 
At each tripwire in the mortgage process, 
the lender or servicer must ensure that flood 
insurance is purchased and maintained. 
Section A. Introduction 4 

(See Section E of these guidelines, 
beginning on page 53, for more information 
on tripwires during the life of the loan.) The 
flowchart on the following page illustrates 
the mandatory purchase process. 
d. Insurance Required at Loan Closing 
A designated loan must have flood 
insurance as a condition of closing. If a 
borrower will not voluntarily obtain 
coverage, the lender must deny the loan. A 
lender cannot accept a borrowers assurance 
that he or she will obtain coverage in the 
future or grant the lender indemnity while he 
or she seeks coverage. Closing a designated 
loan without coverage in place constitutes a 
violation of the regulation. 
e. Life-of-Loan Insurance Coverage 
A key clarification of the 1994 Reform Act 
is that flood insurance must be obtained and 
maintained during the term of the loan. 
Regulated lending institutions and GSEs are 
responsible for providing notice of and 
requiring flood insurance coverage for the 
term of the loan on buildings located or to 
be located in any SFHA in participating 
communities. Flood insurance will be 
required even if the SFHA designation is 
first identified after settlement, but during 
the term of the loan. This requirement is 
designed to combat coverage lapses allowed 
to occur by individuals who believe they 
will not be flooded, and therefore 
discontinue payment of flood insurance 
premiums during the term of the loan. 
f. Lender Responsibilities 
The statutory requirements apply when 
improved real property (that is, a building) 
or manufactured (mobile) home is taken as 
security for a loan. A lenders 
responsibilities include the following 
actions: 
 Determine whether the building or 
manufactured (mobile) home offered as 
security for a loan is, or will be, located 
in an SFHA; 
 Document the determination of flood 
hazard status, whether the building is in 
a low-to-moderate flood risk area or in 
an SFHA, on the Standard Flood Hazard 
Determination Form (SFHDF) shown in 
Appendix 3; 
 Provide notice to the borrower if 
collateral is, or will be, in an SFHA per 
the appropriate sample Notice of Special 
Flood Hazard and Availability of 
Federal Disaster Relief Assistance, the 
two versions of which are shown in 
Appendix 4; 
 Require that adequate flood insurance is 
obtained for buildings in SFHAs; 
 Require the escrow of flood insurance 
premiums if escrow is required for other 
items, such as hazard insurance and 
taxes; 
 During the term of the loan, ensure that 
flood insurance is maintained or 
obtained if the lender becomes aware 
that the building involved subsequently 
becomes part of an SFHA; and 
 Force place flood insurance if the 
borrower allows the policy to lapse or if 
insurance is inadequate. 
While the mandatory purchase requirement 
applies only to buildings located in SFHAs 
of participating communities, NFIP flood 
insurance is available and highly encouraged 
in low-to-moderate flood risk areas of NFIP 
participating communities. This is especially 
significant because, historically, about 25 
percent of the NFIP claims paid have 
actually been outside of SFHAs. 
Lenders and property owners may wish to 
exercise additional caution and consider 
flood insurance in areas subject to flooding 
due to storm water, in areas where 
5 Section A. Introduction 

MANDATORY PURCHASE AT LOAN ORIGINATION 
(Making, increasing, renewing, or extending a loan) 
Section A. Introduction 6 

the NFIP has used approximate methods to 
map SFHAs, or in remote locations where 
no SFHAs have been designated by FEMA. 
A requirement for flood insurance on 
secured property that is not subject to the 
mandatory purchase requirement is a matter 
of contract between the lender and borrower. 
Some buildings in a participating community may be ineligible for Federal flood 
insurance because of statutory restrictions or 
NFIP underwriting rules. (See pages 20-22 
of these guidelines for a discussion of the 
unavailability of Federal flood insurance in 
such instances.) 
g. Disaster Assistance 
Federal disaster assistance, including 
disaster assistance loans from the U.S. Small 
Business Administration (authorized under 
Section 408 of the Stafford Act, discussed 
on page 20), generates the requirement to 
purchase flood insurance. The flood 
insurance requirement applies to disaster 
assistance for repair or replacement of 
buildings or manufactured (mobile) homes 
and/or personal property in SFHAs. Disaster 
assistance for temporary housing is not 
affected by this provision. 
Removing the availability of Federal 
disaster assistance to previous recipients of 
such assistance who live in SFHAs and have 
not yet purchased their own flood insurance, 
achieves two goals: 
 Encourages individuals to fund their 
own recovery, rather than relying upon 
taxpayer funded State or Federal disaster 
assistance; 
 Encourages the use of flood insurance, 
which is a more efficient vehicle for 
funding flood loss recovery. 
5. Operation of the NFIP 
In 1983, the Federal Government decided to 
partner with the insurance industry to 
increase the sale of flood insurance. These 
private insurance industry carriers 
participating in the NFIP are called Write 
Your Own (WYO) companies because they 
write and service federally backed SFIPs 
under their own names. A list of these WYO 
companies can be found online at 
http://www.fema.gov/nfipInsurance/compan 
ies.jsp. 
The chart on the following page provides a 
snapshot of current NFIP operations and the 
functional relationships among major 
participants in the NFIP. 
7 Section A. Introduction 

NFIP OPERATIONS AND FUNCTIONAL RELATIONSHIPS 
As shown below, the NFIP makes federally backed flood insurance available to consumers in 
two ways. One is through NFIP Direct Program agents who deal directly with FEMA. The 
other is through the Write Your Own (WYO) Program, which allows consumers to purchase 
flood insurance from their regular insurance agents and/or companies. 
Under the WYO Program, private property and casualty insurance companies that enter into 
an arrangement with FEMA can write Federal flood insurance and adjust claims under their 
own names. These WYO companies receive an expense allowance and transfer premium 
income in excess of claims to the Federal Government. FEMA funds the losses in excess of 
premiums and sets the rates, coverage, limitations, and eligibility requirements. The flood 
insurance premium charged by a WYO company is the same as that charged by the NFIP 
Direct Program. 
 Contractual Relationship 
Relationship Based on Arrangement with FEMA 
Relationship Undertaken at the Direction of FEMA 
NFIP BUREAU 
AND STATISTICAL 
AGENT 
Processes statistical & 
financial data about 
NFIP policies in force 
Serves as information 
clearinghouse 
WRITE YOUR OWN 
(WYO) 
COMPANIES 
Sell & service policies 
by FEMA arrangement 
Adjust & settle flood 
insurance claims 
Submit transactions 
to NFIP Bureau for 
processing 
Write ~95% of NFIP 
business 
NFIP 
SERVICING AGENT 
(DIRECT PROGRAM) 
Sells & services 
policies written directly 
through the NFIP 
 Maintains Special 
Direct Facility for 
severe repetitive loss 
properties 
Sells Group Flood 
Insurance Policies 
FEMA 
Administers the NFIP for DHS 
Provides guidance to lenders and 
other NFIP stakeholders in meeting 
mandatory purchase requirements 
Section A. Introduction 8 

SECTION B 
COVERAGE AVAILABILITY 
As discussed in the Introduction, the 
National Flood Insurance Program (NFIP) 
takes a community approach to mitigating 
flood hazards and to offering flood 
insurance. This section describes the 
availability of Federal financial assistance, 
including NFIP coverage in specific types of 
communities. 
1. Participating Communities 
a. Community Ordinances 
The Federal Emergency Management 
Agency (FEMA) conducts Flood Insurance 
Studies throughout the United States, in 
cooperation with community officials, to 
determine the location of high flood risk 
areas, called Special Flood Hazard Areas 
(SFHAs), in each community. On the basis 
of these studies, FEMA notifies each 
community of its SFHAs and issues Flood 
Insurance Rate Maps (FIRMs) for 
communities. 
To participate in the NFIP, the community 
enters into an agreement with FEMA. Under 
this agreement, the community adopts and 
enforces ordinances designed to reduce the 
risk of flood damage to buildings in that 
community. These ordinances restrict 
development and limit imprudent building 
within SFHAs, identified on the FIRMs as 
Zones A or V. In exchange, NFIP flood 
insurance becomes available for most 
residential and commercial buildings in the 
community. Flood insurance also is 
available in low-to-moderate flood risk areas 
identified on the FIRMs as Zones B, C, or 
X, although not mandated by law. 
Historically, about one-quarter of all NFIP 
flood claims have been paid in these lower- 
risk areas. 
The communitys floodplain management 
ordinances must require building permits for 
all development within the SFHA. New and 
substantially improved residential buildings 
must be constructed with the lowest floor at 
or above the Base Flood Elevation (BFE), if 
the BFE is shown on the FIRM. Nonresidential buildings can be either elevated or 
floodproofed (made watertight) to the BFE. 
Participating communities that fail to 
adequately enforce their floodplain 
management ordinances may be placed on 
probation if they do not take corrective 
actions within a specified time. NFIP 
policyholders in that community will be 
notified that probation is pending and that 
their flood insurance policies may become 
subject to a premium surcharge. If a 
community fails to bring its floodplain 
management program into compliance with 
the NFIP requirements, it may be suspended 
from the NFIP, which would terminate its 
status as a participating community. In that 
event, NFIP policies would not be renewed 
for property owners in that community, no 
new policies would be issued, and Federal 
disaster assistance would be limited. 
Most suspended communities quickly 
enforce the ordinances and become 
participating again. The success of the 
NFIPs growth can be credited in part to the 
incentive that promotes the receipt of 
Federal benefits contingent upon the 
implementation of land use controls at the 
local level. 
The NFIP also has special provisions for 
those communities whose floodplain 
management activities go beyond the 
minimum required by law. The Community 
Rating System (CRS), codified in the 
National Flood Insurance Reform Act of 
1994, provides incentives in the form of 
reduced insurance premiums to policyholders in communities that voluntarily 
adopt and enforce measures exceeding 
minimum program criteria to reduce the risk 
of flood damage. 
9 Section B. Coverage Availability 

b. Studies and Maps 
As of this edition, more than 20,300 
communities participate in the NFIP. The 
NFIP Community Status Book, available 
online at http://www.fema.gov/fema/csb.shtm, 
lists the status of NFIP participating and 
non-participating communities. It further 
identifies NFIP Regular Program communities, where most renters, homeowners, and 
businesses are eligible to purchase the maximum amount of flood insurance available 
under the NFIP for their type of building, or 
the replacement cost value of their building 
and/or its contents, whichever is less. This 
protection is available for buildings located 
inside and outside of SFHAs, subject to 
NFIP underwriting guidelines. 
The Community Status Book also identifies 
NFIP Emergency Program communities and 
communities that have been suspended. 
Lenders should be aware that a few NFIP 
participating communities remain in the 
Emergency Program, where only limited 
amounts of insurance are available. The 
applicable map for Emergency Program 
communities is the Flood Hazard Boundary 
Map (FHBM). Early in the evolution of the 
NFIP, all participating communities received 
FHBMs, which provided limited flood risk 
information. Once a FIRM, which is a more 
detailed map than the FHBM, was issued, it 
replaced the FHBM. At that time, these 
communities became eligible for conversion 
to the Regular Program. 
The official FIRM for a Regular Program 
community delineates the SFHAs and the 
applicable flood insurance risk zones. 
SFHAs are those areas within the floodplain 
that have a 1-percent chance of being 
flooded in any given year (base flood). Over 
a 30-year period (the life of most residential 
mortgages), there is at least a 26-percent 
chance that a building within an identified 
SFHA will be flooded. 
SFHAs are represented on FIRMs by darkly 
shaded areas designated with the letter A or V. 
FEMA generally performs engineering 
studies to determine the delineation of 
SFHAs. SFHAs are defined as Zones A, 
AO, A1-A30, AE, AR, AR/AO, AR/A1-A30, 
AR/AE, AR/AH, AR/A99, A99, AH, VO, 
V1-V30, VE, and V. These zones are highly 
susceptible to flooding; V-lettered zones are 
also subject to wave action. 
Older FIRMs show numbered A Zones (e.g., 
A1, A2, A30) and numbered V Zones (e.g., 
V1, V2, V30). On newer FIRMs, Zone AE 
represents former Zones A1-A30, and Zone 
VE represents former Zones V1-V30. As 
with other SFHAs, buildings located in the 
temporarily designated flood restoration 
zone (Zone AR) are subject to the 
mandatory purchase requirement. 
Older maps use Zones B and C to represent 
areas of moderate and low flood risk. Newer 
maps have replaced these designations with 
Zone X (shaded) and Zone X (unshaded), 
respectively. 
Areas for which FEMA has made no flood 
hazard evaluation, but for which flooding is 
considered possible, are designated as Zone 
D. Although these areas typically were undeveloped and sparsely populated when 
designated as Zone D, lenders should be 
aware that any new development in such 
areas may have increased the possibility of 
property damage from flooding. 
On the East Coast and Gulf Coast, and along 
the Great Lakes, the FIRM might also show 
Coastal Barrier Resources System (CBRS) 
areas. As explained in the discussion of the 
Coastal Barrier Resources Act and Coastal 
Barrier Improvement Act on pages 21-22 of 
these guidelines, the availability of Federal 
flood insurance is limited in CBRS areas. 
FEMA is responsible for identifying flood 
risks in areas behind levees through flood 
analysis and flood hazard mapping projects. 
FEMA has criteria for recognizing levees as 
providing protection against the 1-percentannual-chance flood. These criteria are 
located in Title 44 of the Code of Federal 
Section B. Coverage Availability 10 

Regulations, Section 65.10. More information 
about the NFIP and levees is located at 
http://www.fema.gov/txt/plan/prevent/fhm/f 
q_pal.txt. 
Finally, certain communities with no SFHAs 
indicated do not have published maps, and 
the entire area is considered to be in Zone X 
(unshaded). Although these areas may not 
be subject to the base flood, local drainage 
problems may cause damage to certain 
buildings. If a lender extends a loan in an 
unmapped participating community and has 
reason to believe there is a possibility of 
flood loss to the secured building, then 
safety and soundness dictate that flood 
insurance coverage should be in place. 
For buildings located outside the SFHAs, the 
statutory requirements do not obligate lenders 
to impose the mandatory flood insurance 
purchase requirement. However, in 
accordance with most mortgage documents, a 
mortgage lender is free to require a borrower 
to carry flood insurance, even if the building 
serving as security for a loan is located 
outside an SFHA. Flood insurance is 
available and encouraged for all eligible 
buildings in participating communities, 
whether inside or outside an SFHA. 
In the late 1990s, FEMA began developing a 
plan to modernize FIRMs, and Congress in 
the early 2000s authorized the first in a 
series of appropriations for FEMA to carry 
out this plan. Flood Map Modernization 
(Map Mod) is FEMAs multi-year effort 
to update and transform flood maps into 
more reliable, easy-to-use, and readily 
available digital products. Map Mod enables 
communities and citizens across the country 
to more efficiently obtain flood hazard data, 
learn their flood risk, and make informed 
decisions about development, floodplain 
management, and mitigation projects that 
limit damages in future flooding events. 
Additional information about Map Mod is 
available at http://www.fema.gov/plan/ 
prevent/fhm/index.shtm. 
c. Determining Location of a Building 
(1) Significance of a Buildings Location 
As stated earlier, the statutory requirement to 
purchase flood insurance applies only when a 
loan is extended on improved real property 
(i.e., a building or manufactured [mobile] 
home) that is located or will be located in an 
SFHA in a participating community. The 
requirement is accomplished by completing 
the Standard Flood Hazard Determination 
Form (SFHDF), as discussed on pages 36-38. 
The current SFHDF and instructions for 
completing it are shown in Appendix 3. Any 
future revisions to the form will be available 
online at 
http://www.fema.gov/business/nfip/sfhdfor 
m.shtm. 
Even though a portion of real property on 
which a building is located may lie within an 
SFHA, the purchase and notice requirements do not apply unless the building itself, 
or some part of the building, is in the SFHA. 
However, even if that part of the building 
within the SFHA is not subject to coverage 
(e.g., a deck), the entire building is considered to be in the SFHA. 
Lenders, on their own initiative, may 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. 
(2) Responsibility in Determining a 
Buildings Location 
Section 42 of U.S.C. 4012a sets the 
ultimate responsibility to place flood 
insurance on the applicable lender, yet 
allows for limited reliance on third parties to 
the extent that the information they provide 
is guaranteed. The lender, servicer, or a 
third-party vendor may conduct the 
determination of a buildings location. 
11 Section B. Coverage Availability 

Under any alternative, the lender, using such 
evidence as is reasonable, must take the 
responsibility for making determinations and 
redeterminations. A financial institution 
cannot rely on the statements of a borrower 
that the structure in question is either inside 
or outside an SFHA. 
Lenders may reasonably seek assistance 
from third parties that have demonstrated 
their knowledge concerning flood map 
information. For regulatory purposes, 
reasonable reliance upon such services in the 
making of a lenders determination is 
regarded as acceptable only to the extent 
that such person guarantees the accuracy of 
the information. 
Some third-party flood zone determination 
companies also provide a form of life-ofloan service that monitors the flood hazard 
status of the secured structure for the term of 
the loan. Third-party life-of-loan service is 
designed to discover a change in flood 
hazard status, thereby minimizing the 
administrative burden for the lender or 
servicer. The law does not require a lender 
to subscribe to a tracking service that 
provides life-of-loan monitoring. 
The determination of a buildings location 
must be made using the FIRM or FHBM and 
may be supplemented with other reliable 
information. If the flood zone designation 
noted on the SFHDF differs from the zone 
designation noted on the flood insurance 
policy, the lender should resolve it and 
document the reasons. There may be some 
legitimate reason for the discrepancy, such as 
the NFIP grandfather rules. In some cases, 
certain buildings may be grandfathered into 
previous zone designations using older 
maps, as described in the next subsection. 
This will manifest as an apparent zone 
discrepancy, although it may actually be correct. Lenders can use third-party resources 
to resolve zone disagreements and ensure 
proper documentation of discrepancies. 
In many instances, community officials, 
insurance company personnel, insurance 
Section B. Coverage Availability 12 
agents, real estate agents, surveyors, or 
appraisers may be helpful and knowledgeable resources. However, to the extent 
that such parties cannot or will not grant 
guarantees, reliance upon the information 
they provide cannot be used for exculpatory 
purposes if the lender is confronted with a 
regulatory violation or a civil claim for 
damages. 
Regardless of how the determination is 
reached, the nondelegable obligation of the 
determination remains the responsibility of 
the lender. 
A lender may rely on a previous 
determination, not more than 7 years old, 
when increasing, extending, renewing, or 
purchasing a loan, but only when the 
previous determination was recorded on an 
SFHDF. This rule does not apply when a 
new loan is made, or if a map revision 
causes a building to be located within an 
SFHA, or if a map change occurs after the 
date of the previous determination. 
The law places the regulatory onus on the 
Federal financial regulatory agencies and 
GSEs to ensure that the lending institutions 
under their jurisdiction meet all requirements. Included in the statutory requirements 
are the lenders determination of whether the 
security is located in an SFHA, the lenders 
notice to the borrower of the SFHA, and the 
borrowers requirement to purchase and 
maintain flood insurance as a condition for 
granting the loan. 
(3) Effect of Grandfathering on Flood 
Zone Determinations 
New flood maps sometimes identify larger 
areas of high flood hazard than do older 
maps. FEMA recognizes that property 
owners might not have built in high flood 
risk areas if the risks had been identified at 
the time. However, funding for new FIRMs 
has historically been inadequate, and 
development contributes to changes in flood 
risk within communities. 

Therefore, in fairness to policyholders who 
built in compliance with the existing 
floodplain management standards for their 
flood zones and/or have continuously 
maintained Federal flood insurance, FEMA 
developed grandfather rules to avoid 
penalizing these policyholders with higher 
rates. These rules allow policyholders to 
benefit in the premium rating of their 
buildings. 
For example, if a new policy is applied for, 
the rates can be based on the FIRM zone and 
the BFE on the old map in effect on the date 
the building was constructed provided that: 
 The building was built in compliance 
with the map in effect at the time of 
construction; and 
 The building has not been altered in any 
way that has resulted in a lowest floor, 
for rating purposes, situated lower than 
the BFE on that FIRM (e.g., enclosing 
the area below an elevated building); and 
 The building has not been substantially 
improved. 
The property owner or insurance producer 
must provide proper documentation to the 
Write Your Own (WYO) company or NFIP 
Servicing Agent. The documentation must 
include: the date of construction; the date of 
the FIRM; the zone on that FIRM in which 
the property is located; the BFE, if any, for 
that zone; a copy of the map panel showing 
the location of the building; and the rating 
element that is to be grandfathered (e.g., 
zone, BFE, elevation difference). A letter 
from a community official verifying this 
information also is acceptable. 
(4) Flood Determination Fee Charged by 
Lender 
The 1994 Reform Act gave lenders and 
servicers authority to pass on a reasonable 
fee to borrowers when a determination is 
made in conjunction with either the: 
 Making, increasing, extending, or 
renewing of a loan initiated by the 
borrower; or 
 Revision or updating of a map; or 
 Required force placement of coverage. 
Passing along a fee to the borrower is not 
allowed on a routine portfolio review unless 
the review results in discovery of a loan for 
which coverage is specifically required. 
When a flood map is revised, or in a 
situation when the Administrator (formerly 
Director) of FEMA determines that an area 
requires a review, a lender is permitted to 
conduct a search on its loan portfolio in the 
affected area and pass through the flood 
determination fee to all borrowers in these 
areas. The pass-through fee is permitted 
whether or not it is ultimately shown that 
coverage is required or already in existence 
on any of the affected buildings. 
The commentary that accompanied the 1994 
Reform Act states that the determination fee 
may include the life-of-loan charge assessed 
to monitor the loan for its term. The Act 
does not specifically define what constitutes 
reasonableness in evaluating the fee. Also 
unspecified is whether incidental expenses, 
cost, or profit margin may be factored into 
the fee. The amount of the fee remains 
subject to review on a case-by-case basis by 
the applicable regulator. 
Where an extension of credit is secured by 
an interest in real property, the Truth in 
Lending Act and its implementing regulation, Regulation Z, specifically provide 
that certain costs and fees, if bona fide and 
reasonable in amount, need to be disclosed, 
but need not be included in the calculation 
of the finance charge. The Truth in Lending 
statute provides that a flood zone 
determination charge is excludable as a 
finance charge only if it is imposed in 
connection with the initial decision to grant 
credit. Therefore, a flood zone search fee 
that does not contain a charge for life-of-loan 
13 Section B. Coverage Availability 

monitoring need not be included as part of 
the finance charge. The fee charged for the 
initial determination must appear on the 
HUD Good Faith Estimate, and the actual 
fee must be disclosed on the HUD-1 
Settlement Statement. 
The Truth in Lending law also requires that 
a fee for services to be performed 
periodically during the loan term (for 
example, the life-of-loan component that is 
charged to monitor continued compliance) 
may not be excluded in the calculation of the 
finance charge regardless of when paid. If a 
consolidated flood determination fee 
includes a life-of-loan component, which 
cannot be apportioned between an initial 
credit decision or future services, the entire 
charge is to be considered a finance charge. 
If a lender is uncertain about what portion of 
a fee is related to the initial decision to grant 
credit, the entire fee may be treated as a 
finance charge. 
Regulation Z does not come into play if a 
lender incurs flood zone determination 
expenses subsequent to the closing of the 
loan, such as expenses arising from a 
remapping or the transfer of a fee to the 
borrower. 
The 1994 Reform Act also contains an 
express provision that preempts other 
Federal or State law with respect to flood 
determination fees charged by lenders. 
d. Letters of Map Change (LOMCs) and 
Appeal Options 
Flood map questions may arise because the 
location of a building with respect to an 
SFHA is central to determining the 
applicability of the mandatory purchase 
provision, as well as the insurance premium 
rate. In theory, the area on a map 
encompassing a buildings location should 
reflect its susceptibility to flood. In practice, 
FIRMs cannot possibly reflect every nuance 
in the physical geography of an area. 
If a lender encounters a discrepancy in the 
flood zone designation, the parties involved 
in making the determination are encouraged 
to resolve the discrepancy before contacting 
FEMA for a final determination. 
This subsection discusses the options for a 
FEMA review to appeal flood zone 
determinations and the kinds of Letters of 
Map Change available: 
 Letters of Determination Review 
 Letters of Map Change (Letter of Map 
Amendment, Letter of Map Revision). 
Detailed information about the different 
types of Letters of Map Change, including a 
link to the fee schedule for Letters of Map 
Revision Based on Fill (discussed below) is 
available at 
http://www.fema.gov/hazard/map/lomc.shtm. 
The subsection concludes with discussions 
of: 
 Community-Initiated Map Revisions 
 Map Availability. 
Borrowers who seek personalized assistance 
may call a FEMA Map Specialist toll free at 
877-336-2627. 
(1) Letter of Determination Review 
(LODR) 
Determining whether a building is located in 
an SFHA requires an examination of the 
location of the building in relationship to the 
SFHA shown on the FIRM. However, 
despite FEMAs efforts to make the maps as 
useful as possible, the boundary location of 
some SFHAs may be difficult to determine 
precisely. This creates a problem in deciding 
whether a building is subject to the 
mandatory purchase requirement. 
When a borrower disputes a lenders 
determination that a property is in an SFHA 
and requires flood insurance, the 1994 Act 
allowed for the LODR review process. The 
borrower and lender may jointly submit a 
Section B. Coverage Availability 14 

review request to the Administrator of 
FEMA during the 45-day period after the 
borrower is notified that flood insurance is 
required. The Administrator of FEMA will 
rule on the determination, provided the 
review request meets the stipulated criteria. 
The determination must have been 
conducted or obtained by a lender using the 
current printed map panel. The review 
process is intended to confirm or disprove 
the accuracy of the original determination. It 
is not intended to result in the initiation of a 
Letter of Map Amendment or Letter of Map 
Revision or resolve questions concerning the 
elevation of a building. 
FEMA will assess a flat fee to cover a 
majority of the costs associated with 
reviewing, recording, processing, and dispatching FEMA determinations. The fee will 
also apply to a finding of insufficient 
information. Requests submitted more than 
45 days after borrower notification will not 
be reviewed, will be returned with the fee, 
and should not be resubmitted. 
Because the fee is not imposed or required 
by the lender, it is not required to be 
included in the finance charge. The lender 
and borrower must decide who will pay the 
fee. Payment for the LODR must be by 
check or money order, payable to the 
National Flood Insurance Program. The 
amount of the fee will be reviewed biannually and, if changed, FEMA will 
publish a notice in the Federal Register. 
LODR requests should be mailed to the 
following address: 
Federal Emergency Management 
Agency 
Determination Review Coordinator 
3601 Eisenhower Avenue, Suite 600 
Alexandria, VA 22304-6439 
The request for a determination review must 
be an original (not photocopied) and signed 
by at least one of the borrowers legal 
representatives for the loan. The lender also 
must sign the request. To ensure the 
involvement of all appropriate parties, 
FEMA will not accept the signature of a 
third-party determiner as a representative for 
either the borrower or the lender. If both 
parties signatures are not included in the 
request, the request will be returned without 
review. The requester will be notified that 
the data submitted with the request does not 
meet the requirements of the law; therefore, 
the lenders obligation to require the 
purchase of flood insurance remains in 
effect. 
The law states that FEMA shall respond to 
review requests within 45 days on disputes 
arising out of loan originations. The 45-day 
time period begins on the day that FEMA 
receives the package. Delay may be 
minimized by submitting the request for 
review immediately after the lender notifies 
the borrower that flood insurance is 
required, and by making sure that the data 
package sent to FEMA is complete. 
Packages that have insufficient information 
will be returned with the fee, and the parties 
will be advised of the information needed 
for the review to be accomplished. The 
borrower will have 14 days to resubmit the 
package with the fee or until the end of the 
original 45 days, whichever is longer. There 
is no additional charge. 
A building found to be in an SFHA is 
required to have flood insurance coverage. 
However, if the Administrator of FEMA 
fails to respond to the review request before 
the later of 45 days after receipt or the 
closing of the loan, then there is no 
obligation for flood insurance coverage until 
the Administrator provides a determination. 
Apart from the law, it is industry practice for 
a lender to contractually require the 
prospective borrower to obtain flood 
insurance coverage as a condition of 
granting the loan. If FEMA subsequently 
determines that flood insurance coverage is 
not required, there is an NFIP procedure that 
allows cancellation with refund of premium 
for the current policy term. 
15 Section B. Coverage Availability 

Supporting Materials for LODR Requests 
Under the determination review process, the 
requesting parties must present supporting 
materials to the Administrator of FEMA for 
review. These materials include the 
completed SFHDF (see Appendix 3), copies 
of the lenders notification to the borrower 
and the applicable FIRM panel, and all other 
technical documentation used in making the 
flood zone determination. The copy of the 
FIRM used to make the determination will 
be examined to assess whether it is the most 
current panel. The title block, including map 
date, scale bar, and north arrow, and the 
portion of the map including the property 
location (with that property location 
annotated) are the only portions of the FIRM 
that must be provided. If the submitted data 
does not include all relevant information, 
FEMA will return the request. 
As noted previously, the request must 
include all technical documentation used by 
the lender or third-party flood zone determination company to make the determination. 
Items to complete this requirement typically 
include: 
 A copy of the tax assessors map 
showing the property; or 
 A property survey map showing the 
location of the building as related to the 
property; or 
 A copy of the plat for the 
subdivision/tract or similar document; or 
 Information showing the relationship of 
the building and FIRM or FHBM. 
Buildings located in rural areas, or areas 
where the FIRM or FHBM shows few 
physical features, may need additional 
reference data to definitively locate the 
property and the building on the property. 
For multiple-unit buildings, data must be 
submitted for all of the building(s) located 
within the same SFHA. Properties with 
multiple buildings must show data for all 
structures. A building porch or deck should 
be indicated in detail. 
FEMAs Response to LODR Requests 
After reviewing the required supporting 
technical documentation, FEMA will issue a 
written determination, the Letter of Determination Review (LODR), indicating its 
concurrence or disagreement with the 
original determination made by the lender or 
third party and stating whether the FIRM 
indicates that the subject building or 
manufactured (mobile) home is in the 
SFHA. 
If the issue is whether the FIRM was read 
correctly, the administrative determination 
review procedures described below are 
appropriate. If the issue is whether the FIRM 
should be amended or revised, a Letter of 
Map Change is appropriate. Letters of Map 
Change (LOMCs) include Letters of Map 
Amendment (LOMAs) and Letters of Map 
Revision (LOMRs). Letters of Map Revision 
include Letters of Map Revision Based on 
Fill (LOMR-Fs). If the determination review 
process indicates that the building is in the 
SFHA, FEMA will notify the requester of 
the determination review that LOMC 
procedures are available to individuals under 
Parts 70 and 65 of the NFIP regulations. 
In conducting the review to determine the 
accuracy of a map, FEMA will check its 
Community Information System database 
for LOMAs, LOMR-Fs, and LOMRs that 
would affect the determination. If the 
original determination overlooked a LOMA, 
LOMR-F, or LOMR, FEMAs final 
response will so state and will provide the 
date of the letter. LOMAs, LOMR-Fs, and 
LOMRs are available through the 
communitys map repository or the FEMA 
Map Service Center. 
In addition, the Administrator of FEMA will 
review contested determinations dealing 
with remapping, map revision, or routine 
portfolio review. The law does not require 
Section B. Coverage Availability 16 

the agency to respond to these inquiries 
within the 45-day time period. 
Any determination that the building is not 
subject to the mandatory purchase 
requirement can be relied on until a new 
map becomes effective for the community. 
The statute states that a determination of the 
Administrator of FEMA shall be final. 
(2) Letter of Map Amendment (LOMA) 
Occasionally, a parcel or individual structure 
may be incorrectly determined to be located 
within the SFHA because of imprecise map 
delineations. Other times, a flood map will 
show property as clearly being in an SFHA, 
even though the building on the property is 
actually above the BFE. Because FIRMs 
cannot reflect every rise in terrain, there will 
be instances of natural islands of high 
ground that are inadvertently included in the 
SFHAs. 
A mechanism is available, however, for 
resolving such a situation. A property owner 
may submit property and elevation materials 
in support of a request for a LOMA to 
remove the property from the SFHA. This 
process involves the property owner and 
FEMA. 
Nevertheless, until the map is physically 
amended or revised, lenders are bound by 
the information shown on FEMA maps 
unless a LOMA has been issued by FEMA 
for the building. Lenders may not close a 
loan on the basis of a guarantee or 
indemnification from a flood vendor or other 
third party as a substitute for a LOMA. 
(3) Letter of Map Revision (LOMR) 
A different, but related, situation is 
presented when a property owner, whose 
land is within an SFHA below the BFE, 
grades and fills the site to raise the level of 
the land above the BFE. In the LOMA 
situation described previously, the natural 
level of the land at the time the map was 
issued was above the BFE, and no artificial 
17 
improvement was needed to accomplish that 
level. In cases where physical changes were 
necessary to raise the structure above the 
BFE, FEMA will not issue a LOMA. However, with the communitys concurrence, 
FEMA will issue a Letter of Map Revision 
Based on Fill (LOMR-F) that, for the 
purposes of the property owner, will 
accomplish the same objective. 
The request for a LOMR-F must be 
approved by the community because 
changes in land level may impact other 
property owners. Submission of a request 
for a LOMR-F by the community confirms 
that the community has reviewed the change 
in land level and found it compatible with 
the communitys planning. A LOMR-F must 
be based on the BFE presented on the 
FIRM. 
A unique situation arises when a building is 
initially constructed at a level below the 
BFE in an SFHA, and its lowest floor is 
subsequently elevated or raised above the 
BFE by supporting walls or pilings. Such a 
structure is then considered an elevated 
building by the NFIP. 
In this situation, there is no basis for the 
issuance of either a LOMA or LOMR-F. 
The building is still in the designated SFHA, 
and its foundation, supporting walls, and 
pilings can come into direct contact with 
floodwaters. When an owner of property 
below the BFE elevates a building so that 
the lowest floor is above the BFE, the flood 
insurance purchase requirement continues to 
apply. Insurance is required because the 
foundation on which the house is elevated is 
still below the BFE, where it remains 
exposed to the action of floodwaters. 
However, because of its reduced exposure to 
damage, the newly elevated building will be 
subject to a lower insurance rate and 
premium. 
A lender may never waive the flood 
insurance requirement if the eligible 
building is determined to be in an SFHA. 
Only FEMA can amend or revise an official 
Section B. Coverage Availability 

flood map to remove the location of an 
insurable building from an SFHA, add it to a 
designated SFHA, change the SFHA 
boundary or flood insurance risk zone 
designation, or modify a BFE. Until a 
property owner has received a LOMA or 
LOMR-F removing the building from the 
SFHA, the information shown on the 
effective FIRM must be used. Questions 
concerning the correctness of the map or the 
proper zone designation of a buildings 
location in accordance with a LOMA or 
LOMR-F are matters beyond the authority 
of the lender. If a lender chooses to close a 
loan while a LOMA or LOMR-F is pending, 
the lender must require flood insurance until 
the LOMA or LOMR-F has been obtained. 
LOMRs also may be granted in situations 
where physical changes have been 
constructed to protect areas from flooding. 
A LOMR has the effect of revising the 
BFEs, SFHA, and/or regulatory floodway 
presented on the FIRM. In regulatory 
floodways, which include the channel of a 
river and the adjacent floodplain that must 
be kept unobstructed, the placing of fill or 
other development is not allowed if it will 
result in any increase in the flood level for 
the SFHA. 
Requests for LOMAs, LOMR-Fs, and 
LOMRs should be mailed to: 
FEMA Map Assistance Center 
3601 Eisenhower Avenue 
 Alexandria, VA 22304-6425 
After the issuance of a LOMR that impacts 
the subject property or after obtaining a 
separate LOMA or LOMR-F, the property 
owner may submit the letter to the lender, 
requesting a waiver. However, even though 
lenders are not required to compel the 
purchase of flood insurance on buildings 
removed from the SFHA by a LOMA, 
LOMR-F, or LOMR, they have the 
discretionary right to continue to require 
flood insurance in accordance with their 
lending documents. Many floods occur 
outside of designated SFHAs, and about 25 
percent of NFIP flood insurance claims are 
for buildings located in these low-risk areas. 
For this reason, owners who are considering 
seeking a LOMA or LOMR-F should first 
consult their lending institutions to 
determine if flood insurance will still be 
required. Further, lenders are encouraged to 
advise LOMA and LOMR-F recipients and 
those affected by LOMRs that floods more 
severe than the base flood can and do occur. 
Property owners should be encouraged to 
contact their property insurance agent to 
voluntarily buy flood insurance coverage for 
their building and its contents. Some 
property owners may be eligible for the 
NFIPs low-cost Preferred Risk Policy after 
the issuance of a LOMA, LOMR-F, or 
LOMR. 
(4) Community-Initiated Map Revisions 
A physical map revision is an official 
republication of a map to effect changes to 
flood insurance risk zones, floodplain and 
floodway boundary delineations, flood 
elevations, and other mapping and boundary 
features within a community. These changes 
typically occur as a result of structural 
works or improvements, annexations 
resulting in additional flood hazard areas, or 
corrections of BFEs or flood insurance risk 
zones. A notice of any change in BFEs on 
flood map panels will be published in the 
Federal Register and in local newspapers, as 
these changes are subject to a statutory 
appeal period. 
(5) Map Availability 
FEMA has specific responsibilities for 
making flood map information available, 
including the following: 
 FEMA must make FIRMs and related 
information dealing with the various 
changes discussed above available free 
of charge to the Federal entities for 
lending regulation (Federal lenders and 
certain other governmental entities), and 
at a reasonable cost to all other parties. 
Section B. Coverage Availability 18 

The maps and other NFIP publications 
are available through FEMAs Map 
Service Center, which can be contacted 
toll free by telephone at 800-358-9616 or 
online at http://msc.fema.gov. (See 
Appendix 5 for additional resources.) 
 FEMA also must provide notice of any 
change to flood insurance map panels, 
including changes effected by a LOMA, 
LOMR-F, or LOMR not later than 30 
days after the map amendment or 
revision becomes effective. FEMAs 
Map Service Center offers a subscription 
service for this notification. 
 Finally, every 6 months, FEMA must 
publish a compendium of all changes to 
FIRM panels, all new FIRM panels, and 
all LOMAs, LOMR-Fs, and LOMRs 
published during the preceding 6 
months. The compendium will show the 
various changes in which some areas are 
removed from the SFHA while others 
are included. This compendium is made 
part of the public record as published in 
the Federal Register. A lender should 
review its loans located within the 
geographic area(s) impacted by the 
changes noted in the compendium. If a 
lender becomes aware that any buildings 
on which it has loans are brought within 
an SFHA, the mandatory purchase 
requirements must be met. 
2. Non-Participating Communities and 
Restricted Coverage Areas 
a. Regulated Lending Permitted 
A community may decide not to 
participate in the NFIP even after it is 
mapped and receives notification from 
FEMA that it has high flood risk areas. 
Non-participating communities are not 
eligible for Federal flood insurance, and 
federally backed loans in these communities 
may be made only outside of SFHAs. 
However, conventional loans can be made 
anywhere in non-participating communities. 
19 
A conventional loan is a loan by a private 
lender, as distinguished from a loan either 
made, secured, insured, or guaranteed by a 
Federal government agency. Lenders 
regulated by, or whose deposits are insured 
by, Federal regulatory agencies may make 
conventional loans secured by mortgages on 
buildings and manufactured (mobile) homes 
in SFHAs in non-participating communities. 
The lender must notify the purchaser that the 
property is located in an SFHA. See the two 
versions of the sample Notice of Special 
Flood Hazard and Availability of Federal 
Disaster Relief Assistance in Appendix 4. 
Lenders are still required to observe the laws 
related to making determinations and 
providing notice, even though the 
requirement to purchase flood coverage does 
not apply. However, because of the lack of 
NFIP coverage and limited Federal disaster 
assistance, lenders should carefully evaluate 
the financial risk involved in making such 
loans. In non-participating communities, a 
lender may require the borrower to have in 
place private flood insurance, if available. 
In those communities where Federal flood 
insurance is not available, the inability of the 
property owner to purchase NFIP coverage 
does not prevent a lender from making a 
conventional loan with respect to that 
structure. The statute mandates coverage 
only when the sale of flood insurance has 
been made available. A lender may exercise 
discretion and decline to make a loan in an 
SFHA where Federal flood insurance is not 
available. Also, lenders with significant 
lending in non-participating communities 
should establish procedures to ensure that 
loans on buildings in SFHAs where flood 
insurance is not available do not constitute 
an unacceptably large portion of the 
institutions loan portfolio. 
Although a conventional loan may be 
extended in a non-participating community, 
a lender may not be able to pass such a loan 
on to a regulated lending institution or to the 
secondary market. Some GSEs, such as 
Section B. Coverage Availability 

Fannie Mae and Freddie Mac, have stated 
that they will not buy mortgages secured by 
properties in non-participating communities 
if they are located in an SFHA. To ensure 
that such loans are not delivered to them, 
Fannie Mae and Freddie Mac now require 
lenders to monitor, on an ongoing basis, 
changes in a communitys status under the 
NFIP. 
b. Federal Financial Assistance and 
Disaster Assistance Limited 
In the event of a federally declared 
disaster, property owners in a nonparticipating community, which has had its 
high flood risk areas identified for at least 
a year, will not be eligible for Federal 
disaster relief assistance. To prevent the 
Federal Governments financial exposure to 
potential loss from flood damage to 
uninsured buildings located in SFHAs in 
non-participating communities, Federal 
officers and agencies are specifically 
prohibited from providing financial 
assistance for acquisition or construction of 
buildings in these areas. This means that 
non-participating community residents and 
developers are ineligible to obtain direct 
Federal loans to construct buildings within 
the floodplain. However, they do remain 
eligible for conventional loans from 
federally insured banks. 
FEMA administers Federal Emergency 
Assistance authorized under Section 408 of 
the Robert T. Stafford Disaster Relief and 
Emergency Assistance Act to comply with 
the National Flood Insurance Reform Act of 
1994. Therefore, mandatory flood insurance 
requirements must be followed for recipients 
whose damaged property is located in 
SFHAs in order for the recipients to be 
eligible for future assistance. 
The law precludes Federal disaster 
assistance related to repair of buildings, 
including U.S. Small Business Administration 
disaster assistance loans, if previously 
received flood disaster assistance was 
conditioned on carrying flood insurance and 
no policy is in effect. 
Section B. Coverage Availability 20 
c. Notification of the Unavailability of 
Federal Disaster Assistance 
When lending on secured improved real 
property in an SFHA in a non-participating 
community, lending institutions must notify 
the borrower of the unavailability of disaster 
relief assistance in the event of a disaster 
caused by flood. 
The notice requirements do not apply to 
unsecured loans, or to loans secured by 
buildings that are not located in an SFHA. 
Under the requirements, affected lenders 
must provide borrowers with written notice 
about whether Federal disaster relief will be 
available on the building. 
For the convenience of lenders, Appendix 4 
provides two versions of a sample notice 
the first for use in NFIP participating 
communities; the second for use in nonparticipating communitiesthat incorporates the language prescribed by law, for use 
when applicable, into the notice a lender 
must provide to the borrower. 
d. Buildings Ineligible for NFIP 
Coverage 
(1) Underwriting Restrictions 
Most buildings are eligible for coverage 
under the NFIP, but there are exceptions. 
For example, a building (or boathouse) built 
completely over water cannot be insured if 
the building (or boathouse) was newly 
constructed or substantially improved on or 
after October 1, 1982. The NFIP policies 
also contain restrictions on insurance 
coverage, such as the portions of finished 
basements and Post-FIRM elevated 
buildings where only enumerated and 
limited coverage is available. A complete, 
current list of coverages and exclusions may 
be found in the Standard Flood Insurance 
Policy (available online at 
http://www.fema.gov/business/nfip/sfip.shtm) 
issued under the NFIP. Lenders may share 
information such as photos and appraisals of 
the building with the property insurance 
agent or company underwriter, who can help 
determine whether the building was 

constructed in compliance with building 
codes and is eligible for coverage. 
For certain categories of properties located 
in participating communities, flood 
insurance coverage may be restricted. This 
includes manufactured (mobile) homes that 
do not meet NFIP insurability requirements. 
In special situations, such as those described 
below, Congress or FEMA has chosen to 
deny eligibility for flood insurance, and 
treats the buildings similarly to those in 
non-participating communities. Therefore, 
the mandatory purchase requirement does 
not apply. Lenders should consider requiring 
private flood insurance for these types of 
risks. 
(2) CBRS Areas and OPAs 
Boundaries of Coastal Barrier Resources 
System (CBRS) areas and Otherwise 
Protected Areas (OPAs) are established and 
mapped by the U.S. Department of Interiors 
Fish and Wildlife Service. Lenders should 
exercise special care with properties in or 
near these areas, which are identified on 
FIRMs by patterns of backward slanting 
diagonal lines, both solid and broken. 
Lenders can determine whether a property is 
located in a CBRS area or OPA by logging 
onto the CBRS page of the FEMA website 
(http://www.fema.gov/business/nfip/cbrs/cbr 
s.shtm). Assistance may also be available 
from insurance agents and companies and 
from community officials. 
While FEMA mitigation measures, such as 
the elevation of buildings in high-risk areas, 
serve to protect buildings, damage to fragile 
coastlines that comes with development is 
unavoidable. Buildings can be repaired. 
However, if damaged by development, 
aquatic habitats (including adjacent wetlands, marshes, estuaries, and inlets that are 
the habitat for wild life and ecosystems that 
support local fisheries and provide 
recreational areas) can be lost forever. 
Coastal barriers are unique landforms that 
also serve as the mainlands first line of 
defense against the impacts of coastal storms 
and erosion. 
Therefore, by law, federally regulated 
mortgage lending and Federal disaster assistance may not be available in these areas. 
Federally backed flood insurance is not 
generally available for new construction or 
substantial improvements in CBRS areas or 
OPAs. However, there are a few exceptions. 
Eligibility for Federal flood insurance 
depends on whether the CBRS areas or 
OPAs in the community in which the 
building is located were designated by the 
Coastal Barrier Resources Act (CBRA) of 
1982 or the Coastal Barrier Improvement 
Act (CBIA) of 1990. 
Under the 1982 Act, a building in a CBRS 
area is eligible for coverage if all of the 
following requirements are met: 
 A legally valid building permit for the 
construction of the building was issued 
prior to October 1, 1983; and 
 The building was built (walled and 
roofed) prior to October 1, 1983; and 
 The building was not substantially 
improved or substantially damaged on or 
after October 1, 1983. 
Eligibility under the 1990 Act for buildings 
in a CBRS area or OPA requires that: 
For CBRS areas: 
 A legally valid building permit for the 
construction of the building was issued 
prior to November 16, 1990; and 
 The actual start of construction of the 
building was prior to November 16, 
1990: and 
 The building was not substantially 
improved or substantially damaged on or 
after November 16, 1990. 
For OPAs: 
 A legally valid building permit for the 
construction of the building was issued 
prior to November 16, 1991; and 
21 Section B. Coverage Availability 

 The building was built (walled and 
roofed) no later than November 16, 
1991; and 
 The building was not substantially 
improved or substantially damaged after 
November 16, 1991. 
 Or, the building is used in a manner 
consistent with the purpose for which the 
area is protected, regardless of the date 
of construction. 
The CBRA of 1982 and CBIA of 1990 do 
not prevent private development, private 
financing, or private flood insurance, if 
available, in CBRS areas and OPAs. Any 
such development is subject to all applicable 
state and local laws, regulations, and 
building codes. 
Detailed background information about 
CBRS areas and OPAs is available online at 
the web address given on page 21. 
Buildings already located in the designated 
areas and walled or roofed prior to the 
designation remain eligible for coverage. If 
a building constructed in a designated area 
prior to its being designated sustains 
substantial damage as a result of a fire, 
flood, hurricane, or other causes, the 
restored building is not eligible for flood 
insurance coverage. 
Lenders are required to notify borrowers that 
the building is in an SFHA, and that federally 
backed flood insurance is not available for the 
building. However, this situation does not 
prevent the making of a conventional loan. As 
with loans in non-participating communities, 
lenders would be well advised to assess the 
flood risk in deciding whether to grant the 
conventional loan. 
(3) Buildings in Violation of State or 
Local Laws 
In accordance with Section 1316 (42 U.S.C. 
4023) of the National Flood Insurance Act 
of 1968, a conventional loan may be made 
when the building is located in an SFHA of 
a participating community but is not eligible 
for Federal flood insurance protection 
because it has been declared to be in 
violation of local floodplain management 
building codes. Nevertheless, compliance 
with the provision for notifying the borrower 
that the building is in an SFHA is especially 
important. Because of violations relating to 
protection against flooding, buildings that 
come under the provisions of Section 1316 
usually will be highly susceptible to flood 
damages, and are a far greater risk to the 
lender than buildings compliant with 
floodplain management ordinances. 
With respect to both CBRS/OPA properties 
and Section 1316 properties, the lack of 
available NFIP coverage in a participating 
community does not prohibit a lender from 
making a conventional loan. The statute 
mandates coverage only when the sale of 
flood insurance has been made available. 
The lender may require private flood 
insurance coverage for buildings declared in 
violation of state or local laws under Section 
1316. 
Section B. Coverage Availability 22 

SECTION C 
GENERAL MANDATORY PURCHASE PROVISIONS 
This section describes the statutory 
requirements, the exceptions, and the 
practice of the lending industry in meeting 
its compliance requirement. It explains flood 
insurance availability and coverage options 
under the National Flood Insurance Program 
(NFIP). Appendix 1, Legal References, 
provides additional legal citations. 
1. Entities Encompassed by the Law 
The Flood Disaster Protection Act of 1973 
required the purchase of flood coverage for 
the term of the loan. The National Flood 
Insurance Reform Act of 1994 requires flood 
insurance at any time during the term of the 
loan when the lending institution determines 
that the building or manufactured (mobile) 
home is or will be located in a Special Flood 
Hazard Area (SFHA). 
Section 4012a(b) of the 1994 Reform Act 
subdivides its treatment of the entities 
regulated, yet imposes similar requirements 
on the three types of affected lenders. 
Essentially, the statute mandates flood 
insurance coverage even if the SFHA 
designation is first identified after 
settlement, but during the term of the loan, 
because of remapping or other reasons. 
The statutory requirements apply to both 
consumer and commercial loans, whether 
they are new loans, refinances, consolidations, or renewals of existing extensions of 
credit. The mandatory purchase requirement 
attaches to any type of secured loanfixed 
rate, variable rate, or balloon loan. It also 
applies regardless of the type of security 
interest taken (e.g., a mortgage indenture, 
judgment note, cognovit note, or any other 
type of security or trust agreement). The 
mandatory purchase provisions apply even 
on those loans where real estate is secured 
out of an abundance of caution. 
The duties of a regulated lender with respect 
to Federal flood insurance requirements for a 
particular loan cease upon the sale of the loan. 
An exception would be if the seller of a loan 
agrees to retain responsibility for complying 
with the statutory requirements under a loan-
servicing agreement with the transferee. For 
example, if a regulated lender sells the loan to 
an unregulated lender while retaining 
servicing rights, the regulated lender will 
retain mandatory flood insurance purchase 
obligations under the service contract. 
Most of the provisions of the 1994 Reform 
Act became effective on September 23, 1994, 
and apply prospectively to all new loans and 
regulated activity, but not to existing loans for 
which no changes have occurred since that 
time. Review of existing loans is encouraged, 
but not required. 
The following entities are not currently 
covered by the 1994 Reform Act: 
 Unregulated private financial institutions 
that engage primarily in the purchase of 
mortgage loans 
 Unregulated mortgage bankers or 
brokers who serve only as loan 
originators 
 Private mortgage lenders 
 State regulated lending institutions not 
subject to Federal oversight. 
a. Federally Regulated Lenders 
The most significant mandatory purchase 
provision is found in Title 42 U.S.C. 
4012a(b)(1). That subsection directs Federal 
regulators to adopt regulations requiring the 
lenders under their jurisdiction to compel 
borrowers to purchase flood insurance 
protecting any improved real estate or a 
23 Section C. General Provisions 

mobile home located or to be located in an 
SFHA, if the building, manufactured 
(mobile) home, or any applicable personal 
property is to be security for the loan. This 
provision is the crux of the law around 
which the other requirements of the 1994 
Reform Act have been structured. 
The flood insurance provisions of the 1994 
Reform Act required the following Federal 
agencies to revise their flood insurance 
regulations to reflect the changes in the law: 
 Board of Governors of the Federal 
Reserve System (FRS) 
 Office of the Comptroller of the 
Currency (OCC) 
 Office of Thrift Supervision (OTS) 
 Federal Deposit Insurance Corporation 
(FDIC) 
 National Credit Union Administration 
(NCUA) 
 Farm Credit Administration (FCA). 
These six Federal entities for lending 
regulation have issued a joint regulation to 
fulfill the statutory requirements. All six 
agencies coordinated and consulted with the 
Federal Financial Institutions Examination 
Council (FFIEC) in developing their joint 
regulation. The final regulation was 
published in the Federal Register on 
August 29, 1996, and appears in each 
agencys regulations. Citations to the 
various CFR sections can be found in 
Appendix 1. 
The institutions supervised by the six 
agencies are referred to collectively as 
regulated lending institutions or lenders, 42 
U.S.C. 4003(a). These lenders include any 
bank, savings and loan association, credit 
union, Farm Credit System Institution, or 
similar institution that is supervised, 
regulated, or insured by a Federal entity for 
lending regulation. 
The regulatory agencies interpret the 1994 
Reform Acts definition of regulated 
lending institution to include subsidiaries 
of institutions that are service corporations. 
This definition includes the phrase, similar 
institutions subject to the supervision of a 
Federal entity for lending regulations, as 
defined in 4003(a)(10). Federal lending 
regulators deem subsidiaries of the 
institutions they regulate as subject to the 
rules applicable to the operations of the 
parent. Therefore, although a subsidiary 
entity that engages in mortgage brokering or 
servicing may not be directly regulated, it is 
considered subject to the statutory requirements. This also may apply to lending 
syndicates and their managing entities. 
As noted in the Supplementary Information 
section of the final regulations, the agencies 
believe that the purpose of the Federal flood 
insurance statutes is best served by treating 
loans made by a subsidiary service 
corporation in the same way as loans made 
by others in the corporate structure. For 
example, the FDICs portion of the joint 
final rule makes subsidiaries of insured 
nonmember banks subject to flood insurance 
requirements by defining the term bank to 
include a subsidiary of any such institution. 
This provision was intended to increase 
compliance with the mandatory purchase 
requirements among regulated lenders. This 
practice also ensures uniform and consistent 
treatment for regulated financial institutions. 
The 1994 Reform Act required the 
applicable Federal regulator to develop 
regulations that direct institutions under 
their jurisdiction not to make, increase, 
extend, or renew any loan on a building or 
manufactured (mobile) home located or to 
be located in an SFHA unless flood 
insurance is purchased and maintained for 
the term of the loan. Therefore, refinancing 
an existing loan is to be considered as the 
Section C. General Provisions 24 

making of a new loan for purposes of the 
mandatory flood insurance purchase 
requirements. 
b. Government-Sponsored Enterprises 
Government-Sponsored Enterprises (GSEs) 
for Housing include the Federal National 
Mortgage Association (Fannie Mae) and the 
Federal Home Loan Mortgage Corporation 
(Freddie Mac). These entities are privately 
owned, federally chartered corporations 
whose sole business is to support residential 
housing by providing a secondary market for 
mortgages. GSEs are required to implement 
procedures reasonably designed to ensure 
that designated loans have flood insurance at 
the time of origination and at any time 
during the term of the loan. 
The variation in the compliance wording 
from that found in the regulated lender 
provision can be attributed to the fact that 
GSEs have a contractual, not a regulatory, 
relationship with their sellers. The GSE 
requirements are imposed upon the primary 
lender as a condition of purchasing the loan. 
Thus, borrowers not directly covered by the 
mandatory purchase law ultimately will be 
required to satisfy the statutory flood 
insurance requirements if their lenders sell 
their loans to Fannie Mae or Freddie Mac. 
The mandatory purchase requirements flow 
from the original transaction. 
Also, under the guidelines of Fannie Mae 
and Freddie Mac, servicers of loans sold to 
those agencies are required to assume 
responsibility for compliance with the 
mandatory flood insurance requirements. 
However, no existing flood insurance 
requirements cover lenders or servicers that 
are not federally regulated and that do not 
sell loans to Fannie Mae, Freddie Mac, or 
other GSEs. 
As secondary market agencies, GSEs have 
no direct contact or dealings with borrowers, 
but do have the ultimate exposure on the 
loan. Consequently, the GSE guidelines are 
designed to ensure that any covered loan 
they buy has flood insurance for the life of 
the loan. Freddie Mac and Fannie Mae now 
require lenders and servicers to keep flood 
insurance up to date, monitor publication of 
all future map and community changes, and 
impose or relieve the mandatory purchase 
requirement during the term of the loan. 
The GSEs have the ability to establish their 
own requirements to protect their interest in 
the loans they purchase. These standards can 
be more stringent than those found under the 
Federal regulations. For example, although 
the Federal regulators do not require 
monitoring for map changes, the GSEs do, 
thereby providing the impetus for 
monitoring. 
As of this printing, Fannie Mae accepts 
flood insurance deductibles up to the current 
NFIP maximum deductible limit for a 
single-family structure, which is $5,000. The 
maximum NFIP deductible for residential 
condominium buildings is $25,000. The 
most current Selling and Servicing Guides 
and Announcements (if applicable) should 
be consulted to reference Fannie Maes 
existing flood insurance requirements. These 
documents may be accessed online at 
http://www.efanniemae.com. Lenders who 
have additional questions regarding flood 
insurance requirements may contact their 
Customer Account Manager, Servicing 
Consultant, or Portfolio Manager. 
Freddie Mac states that any private flood 
insurance policy must contain terms and 
conditions at least equivalent to the terms 
and conditions of coverage provided under 
the NFIP. 
For one- to four-unit properties (including 
properties within a Planned Unit Development or ground lease community) in an 
SFHA, Freddie Mac requires that the flood 
insurance coverage on insurable premises 
equals at least the lowest of the following: 
 The unpaid principal balance of the 
mortgage (if the mortgage is a second 
25 Section C. General Provisions 

mortgage, the insurance must be 
calculated on the aggregate unpaid 
principal balance of the second mortgage 
and all superior liens); or 
 The maximum amount of coverage sold 
under the NFIP; or 
 The replacement cost of the insurable 
improvements. 
See Chapter 58 of the Freddie Mac Single 
Family Seller/Servicer Guide at 
http://www.allregs.com/fhlmc. 
c. Federal Agency Lenders 
The statute in 4012a(b)(2) broadened the 
flood insurance requirement to specifically 
include loans on applicable real property and 
mobile homes secured by Federal agencies. 
Federal agency lenders may not subsidize, 
insure, or guarantee any loan if the building 
securing the loan is in an SFHA of a 
community not participating in the NFIP. 
For the most part, Federal agency lenders 
follow the same standards set by the Federal 
regulators, although some exceptions can be 
found. The Federal agency lenders are: 
 Federal Housing Administration (FHA) 
 Small Business Administration (SBA) 
 Department of Veterans Affairs (VA) 
 U.S. Department of Agriculture (USDA), 
Rural Development 
- Rural Housing & Community Service 
- Rural Business & Cooperative Service 
- Rural Utilities Service. 
2. Specific Provisions of the Law 
a. Limits Available 
As of this edition, the maximum limits of 
flood insurance coverage available under the 
NFIP are as follows: 
NFIP Maximum Limits of Coverage 
Coverage Type 
EmergencyProgram 
Regular 
Program 
Building 
Single-family dwelling 
2- to 4-family dwelling 
Other residential 
Non-residential 
Contents 
Residential 
Non-residential$ 35,000 
$ 35,000 
$100,000 
$100,000 
$ 10,000 
$100,000 
$250,000 
$250,000 
$250,000 
$500,000 
$100,000 
$500,000 
Special limits apply in Alaska, Hawaii, 
Guam, and the Virgin Islands. For details, 
and future changes to NFIP coverage limits, 
refer to page RATE 1 in the NFIP Flood 
Insurance Manual at 
www.fema.gov/business/nfip/manual.shtm. 
As shown in the table above, the current 
maximum limit of coverage for residential 
properties is $250,000 for building and 
$100,000 for contents; and for nonresidential properties, $500,000 for building 
and $500,000 for contents. Whenever the 
Federal Emergency Management Agency 
(FEMA), which administers the NFIP, 
changes the amounts of coverage available 
or amends the policy form, the change is 
published in the Federal Register and the 
Flood Insurance Manual. 
Acceptable proof of coverage may be a copy 
of the Flood Insurance Application and 
premium payment, or a copy of the 
Declarations Page. The NFIP does not 
recognize binders or certificates of 
insurance. 
Section C. General Provisions 26 

(1) Land and Land Values Not Insurable 
The statutory requirements apply to 
improved real propertythat is, land with a 
building on it, including a manufactured 
(mobile) home. Raw land is not insurable 
under the NFIP. The building must be 
insurable under NFIP requirements in order 
to qualify for coverage. 
Inasmuch as the NFIP does not provide 
insurance coverage for land, only for 
buildings, the location of a building in 
relation to the SFHA determines the 
applicability of the mandatory purchase 
provisions. Some portion of the building 
itself, and not just a portion or portions of 
the land, must be located in an SFHA for the 
mandatory purchase provisions to apply. 
Buildings located inside and outside of the 
SFHA on the Flood Insurance Rate Map 
(FIRM) are insurable in NFIP participating 
communities. 
(2) Calculating Coverage 
To meet compliance requirements, the 
amount of flood insurance must at least be, 
but is not limited to, the lowest of: 
 The outstanding principal balance of the 
loan(s); or 
 The maximum amount of coverage 
available under the NFIP for the 
particular type of building; or 
 The full insurable value of the building 
and/or its contents, which is the same as 
100-percent replacement cost value 
(RCV). (Unlike the practice in other 
lines of property insurance, building 
RCVs under the NFIP do not include 
market values or the value of the land.) 
To protect collateral interests, a lender 
should consider whether its collateral is 
adequately insured against flood damage. A 
sound flood insurance risk management 
approach follows the insurance industry 
practice of insuring buildings to full RCV. 
Such a risk management strategy meets or 
exceeds the minimal compliance requirements and is the easiest approach for lenders 
to implement. Security interests in SFHAs 
should be protected with flood insurance to 
the full insurable value, to the extent 
possible under the NFIP. Further, FEMA 
recommends that lenders seek guidance 
from regulatory authorities. 
The maximum amount of flood insurance 
coverage available under the NFIP is the 
lesser of the insurable value of the building 
or the maximum amount of coverage 
available for that type of property under the 
NFIP. This is especially significant in cases 
where the loan exceeds the value of the 
insurable building(s). Where the outstanding 
principal balance of the loan exceeds the 
insurable value of the building, the 
insurance amount should be the insurable 
value of the building rather than the 
outstanding principal balance of the loan. If 
the lender does not take into account 
separate valuations of uninsurable land and 
property improvements, the insured may be 
paying for coverage that exceeds the amount 
the NFIP will pay in the event of a loss. 
Lenders should avoid creating such a 
situation. 
Lenders should follow the same general 
business practice in calculating the flood 
insurance coverage amount on a building as 
they do in placing other hazard coverage, 
e.g., homeowners insurance. The terms and 
conditions of the hazard clause contained in 
the loan document fully describe the rights 
and conditions of the parties. 
Although the statute requires the lenders 
interest to be protected by flood insurance, a 
lender may need to consider other factors, 
such as Fannie Maes and Freddie Macs 
requirements, in determining the amount of 
insurance required. Depending on the 
practice of the mortgagee, the policy may 
not be sufficient to protect the full equity 
amount held in the property by the 
mortgagor in the event of a loss. If the 
lender opts to protect only its security in the 
27 Section C. General Provisions 

loan, the amount of the policy may be 
insufficient to cover the cost of repairing the 
building. 
By insuring buildings to the full RCV, the 
lender and borrower are both better 
protected. 
For multiple buildings, the lender must 
ensure that a separate flood insurance policy 
is provided for each building requiring 
coverage. The NFIP allows one policy per 
building. 
(3) Loss Payments 
Lenders should seek the assistance of 
property insurance agents or companies 
when determining the appropriate flood 
insurance coverage amounts, as they do for 
other lines of insurance. The borrowers 
financial interest should also be taken into 
account. Further, agents can help identify 
and consider the extent of recovery allowed 
under the three forms of the NFIPs 
Standard Flood Insurance Policy (SFIP), 
which are described below: 
 General Property Form 
 Designed for use on non-residential 
risks 
 Limits recovery to actual cash value 
(i.e., the cost to repair or replace an 
insured item of property at the time 
of loss, less the value of its physical 
depreciation). 
 Dwelling Form 
- Designed for use on residential risks 
- Pays losses to most building 
elements on the replacement cost 
basis, only if: 
- The building was the primary 
residence for at least 80 percent 
of the preceding 365 days or the 
period of ownership; and 
- At the time of loss, the building 
insurance amount represented at 
least 80 percent of the replacement cost immediately before the 
loss, or the maximum available 
under the NFIP. (Replacement 
cost means that the settlement is 
not subject to a deduction for 
depreciation.) 
- Otherwise, the Dwelling Form pays 
on the actual cash value basis, which 
involves a deduction for depreciation. This is also the case for 
contents coverage. 
- Special loss settlements apply to 
manufactured (mobile) homes. 
 Residential Condominium Building 
Association Policy (RCBAP) 
- Designed for residential condominium associations 
- Has its own loss settlement provisions. 
NFIP policies include Increased Cost of 
Compliance (ICC) coverage for the 
increased cost to rebuild, or otherwise alter, 
a flood-damaged property to bring it into 
conformance with state or local floodplain 
management laws. 
ICC coverage is mandatory for all SFIPs 
except for (1) those sold in Emergency 
Program communities, (2) contents-only 
policies, (3) Dwelling Forms on individual 
condominium units, and (4) Group Flood 
Insurance. For these four cases, ICC 
coverage is not available. In a condominium 
building, ICC coverage is available only 
through the Condominium Associations 
flood policy. 
The current ICC coverage limit is $30,000 
per building or, for non-condominium 
townhouse construction, per unit, per policy. 
This coverage amount is in addition to the 
Building Amount of insurance purchased. 
However, for any one flood event, the 
amount of combined loss payment received 
from Building coverage and ICC coverage 
Section C. General Provisions 28 

cannot exceed the maximum program limits 
of $250,000 for residential structures and 
$500,000 for non-residential structures. 
ICC coverage should not be considered in 
determining the amount of flood insurance 
required. 
(4) Deductible 
The standard deductible is $500 for new 
construction, for all buildings constructed 
after the community adopted its initial Flood 
Insurance Rate Map (Post-FIRM), and for 
buildings rated in Zones A99, B, C, D, or X. 
The standard deductible for older buildings 
(Pre-FIRM) is $1,000. Deductibles are 
applied separately to buildings and again to 
contents. 
The maximum optional deductible, if 
acceptable to the lender, for a single-family 
building is $5,000. Deductibles of $10,000 
to $50,000 are available for non-residential 
buildings. Optional deductibles are not 
available for Preferred Risk Policies. 
Standard practice in the financial industry is 
for the lender to dictate the amount of the 
deductible according to the authority found 
in the loan document hazard clause. A 
modification in the deductible can be 
accomplished at renewal or by endorsement 
mid-term with the lenders written request. 
Lenders may exercise their business 
judgment prerogative by requiring only the 
standard deductible to be carried as a 
safeguard in protecting their interest in the 
improved real estate. The GSE secondary-
market members designate what they 
consider as the proper deductible. Freddie 
Macs guide states the deductible may not 
exceed the maximum deductible currently 
allowed under the NFIP for the type of 
improvements insured. Fannie Maes guide 
states that they will accept deductibles up to 
the maximum deductible available under the 
NFIP for all policy types. 
(5) No Coverage if Land Loan Only 
The NFIP does not insure land, and the law 
does not address mortgages secured by land 
alone. Acquisition and development loans 
are not subject to the regulation because 
they do not meet the definition of a 
designated loan as defined by the 1994 
Reform Act. 
Therefore, if the purpose of a loan transaction is to facilitate the purchase of land for 
subsequent development, and any building 
(structure) on the real property is of nominal 
value, the wording of the mortgage must 
specifically exclude the building as part of 
the security for the loan in order to avoid the 
mandatory purchase requirement. 
(6) Low-Value Building on High-Value 
Land 
Lenders are sometimes confronted with a 
situation where a building is located on land 
whose value alone would be sufficient to 
secure the loan without regard to the value 
of the building. However, the lender cannot 
waive the flood insurance requirement, even 
though the value of the land would provide 
more than adequate security for the amount 
of the loan. If the land has a building on it, 
and the lender has a security interest in that 
building, the lender must require the 
purchase of flood insurance to protect its 
security interest. 
The insurable value of the building and its 
improvement(s) will govern the amount that 
can be required. The amount of required 
flood insurance coverage is the least of the 
principal balance of the loan(s), the 
insurable value of the building, or the 
maximum coverage available under the 
NFIP. The NFIP policy does not provide 
coverage for losses in excess of the value of 
the insurable building. By requiring 
adequate coverage, the lender also is 
protecting the Federal Governments 
interests by preserving the assets of agencies 
that insure the lenders deposits. 
29 Section C. General Provisions 

The question of limits on relatively low-
value buildings can be an issue, especially in 
agricultural areas where the buildings are 
included as part of the loan collateral. The 
law does not differentiate agriculture from 
other areas of lending, and no exception by 
regulated lenders can be made without 
legislative action. 
The value of the land should not be 
considered when calculating the required 
limits. 
(7) Buildings in the Course of Construction 
If a building to be constructed in an SFHA 
will become eligible for coverage when 
completed, flood insurance may be purchased to provide coverage during the 
construction period. Therefore, when a 
development or interim loan is made for 
construction of insurable improvements on 
land, flood insurance coverage can be 
purchased, even though construction has not 
begun. 
While the NFIP statutes require flood 
insurance at loan closing, they do not 
specifically address the subject of buildings 
in the course of construction. For that 
reason, each regulatory agency or lender 
must determine at what point in the 
construction process coverage is required. 
One option for implementing the mandatory 
flood insurance coverage is to require the 
purchase of the policy at the time that the 
development loan is made, in an amount 
adequate to meet the mandatory purchase 
requirement. 
Another option would be for the lender to 
require flood insurance at the time of a 
specified drawdown of the loan for actual 
construction of the building (see Appendix 
6, B.9). This would require the lender to 
monitor the loan more closely to determine 
when actual construction begins. A policy 
obtained under either option would not be 
subject to the standard 30-day waiting 
period. The policy would be effective at the 
time of the flood insurance application and 
presentment of premium. 
Material to be used on a building in the 
course of construction, but yet to be walled 
and roofed, is eligible for flood insurance, 
subject to certain underwriting restrictions. 
Materials or supplies intended for use in such 
construction, alteration, or repair are insurable if they are contained within an enclosed 
building on the premises or adjacent to the 
premises. The NFIP, to the extent possible, 
conforms its practices with those of fire 
insurers by providing insurance coverage 
that begins during the period of time when 
construction is taking place. 
Buildings in the course of construction that 
have yet to be walled and roofed are eligible 
for coverage except when construction has 
been halted for more than 90 days and/or if 
the lowest floor used for rating purposes is 
below the Base Flood Elevation (BFE). 
Additionally, for a condominium building in 
the course of construction to be eligible under 
the RCBAP form, the building must be 
owned by a condominium association, which 
the NFIP defines as the entity made up of the 
unit owners responsible for the maintenance 
and operation of: 
 Common elements owned in undivided 
shares by unit owners; and 
 Other real property in which the unit 
owners have use rights; 
where membership in the entity is a required 
condition of unit ownership. 
For new construction in Regular Program 
communities, the NFIP Elevation Certificate 
and the premium will be based on an 
elevation figure derived from construction 
drawings. However, the policy will not be 
renewed until a new Elevation Certificate, 
based on actual construction, has been 
submitted. Coverage under the policy 
becomes available immediately when the 
construction starts and is not delayed until 
Section C. General Provisions 30 

the building has reached a walled and roofed 
condition. 
However, if the lowest floor, including a 
basement floor, of a building under 
construction in any A Zone or V Zone will 
be below the BFE, the building must be 
walled and roofed before coverage is 
available. 
The Elevation Certificate must be completed 
by a surveyor, engineer, or architect. 
Lenders who wish to gain familiarity with 
the Elevation Certificate and its uses may 
benefit from the NFIP video Insuring a 
Dream. The video can be accessed at 
http://training.nfipstat.com/portal2/default.asp. 
(8) Manufactured (Mobile) Homes/Travel 
Trailers 
To be eligible for coverage under the NFIP, 
a manufactured (mobile) home/travel trailer 
must be on a permanent foundation and 
meet specific anchoring requirements for its 
location. 
A manufactured (mobile) home is a structure 
built on a permanent chassis, transported to 
its site in one or more sections, and affixed 
to a permanent foundation. Manufactured 
(mobile) homes, referred to as mobile 
homes for brevity in the remainder of this 
subsection, do not include recreational 
vehicles. 
Under the NFIP, a travel trailer can be 
considered a building only if it is without 
wheels, built on a chassis and affixed to a 
permanent foundation, and regulated under 
the communitys floodplain management 
and building ordinances or laws. 
The statutory requirements apply to a loan 
securing mobile homes that are, or will be, 
located in an SFHA. NFIP coverage is 
available only with respect to a building or 
mobile home and not the land on which the 
building or mobile home sits. A chattel 
mortgage on a mobile home will trigger the 
mandatory purchase requirements. 
In instances where the location of the mobile 
home has not been established by the time of 
closing, the bank should notify the borrower 
that flood insurance must be obtained if the 
mobile home will eventually be located in 
an SFHA (in a participating community) and 
must be permanently affixed to a foundation 
to be eligible for coverage under the NFIP. 
In order to make this determination, the 
bank should require borrowers to provide 
notice to the bank when the mobile home is 
permanently anchored. A flood determination must then be made by the bank, and if 
the mobile home is located in an SFHA, the 
bank must notify the borrower that flood 
insurance must be purchased within 45 days 
of notice. 
Although the Real Estate Settlement 
Procedures Act (RESPA) does not require 
escrowing on a loan where land is not part 
of the security, the scope of the 1994 
Reform Act includes escrowing on a 
designated loan secured by a mobile home. 
Section 10 of RESPA, which pertains to the 
escrow rules, applies only to mobile homes 
that are also secured by the real estate upon 
which they are situated; however, the 1994 
Reform Act is broader in scope. A mobile 
home lender is required to escrow even if 
the loan is on the mobile home only. 
A substantial number of mobile homes have 
the peril of flood included under a private 
contract of insurance. A lender should 
review the private flood insurance coverage 
in light of the mandatory purchase 
requirement and FEMA criteria (see pages 
57-58 of these guidelines). 
(9) Personal Property 
Flood insurance coverage for contents is not 
required by law unless personal property, in 
addition to a building, secures the loan. 
Because residential mortgages rarely include 
personal possessions as part of the loan 
31 Section C. General Provisions 

security, lenders are not required to compel 
borrowers to purchase contents coverage, as 
this is not a designated loan. When a 
commercial loan on a building includes 
inventory and other trade or business 
movable property as security for a loan, that 
property must be covered by a separate 
policy under the General Property form. 
On the other hand, flood insurance is not 
required for a loan financing inventory 
where the secured collateral is stored in a 
building located in an SFHA and the 
building is not security for the loan. Lenders 
are encouraged to advise borrowers to 
discuss their contents coverage needs with 
their agents. Obtaining contents coverage for 
personal property or inventory located in 
high flood risk areas is prudent, even when 
not mandated by law. 
b. Underinsured Buildings 
The 1994 Reform Act repealed Title 42 
U.S.C. 4013(b)(6), which contained a 
statutory limit for coverage required to be 
purchased. The Act requires coverage that is 
in an amount at least equal to the 
outstanding principal balance of the loan or 
the maximum limit of coverage made 
available. Therefore, to meet minimum 
compliance requirements, lenders must see 
to it that flood insurance coverage on a 
building is at least the lowest of the 
following: 
 The maximum amount of NFIP flood 
insurance coverage available; or 
 The outstanding principal balance of the 
loan(s); or 
 The insurable value (RCV) of the 
building. 
Lenders should consider whether minimum 
required coverage amounts will be adequate 
to protect their interests and those of their 
borrowers. Borrowers should be urged to 
seek assistance from their agents regarding 
their flood insurance needs. To the extent 
allowed by the maximum limits available 
under the NFIP, flood insurance coverage 
amounts should include the cost of the 
foundation and correspond to the coverage 
amounts provided by homeowners insurance, which typically are purchased at the 
level of insurance to value. 
To address the underinsurance deficiency, 
4012a(e) of the 1994 Reform Act specifies 
a lenders notification and placement 
requirements for a building that is covered 
by less flood insurance than required by the 
Act. When a lender (or a servicer acting on 
the lenders behalf) discovers that a building 
used as security is covered by an inadequate 
amount of flood insurance, it must first 
provide notice and opportunity for the 
borrower to obtain the required amount of 
flood insurance. If the borrower fails to 
purchase insurance, the lender then must 
purchase flood insurance in the appropriate 
amount on the borrowers behalf. The 
statute designates the same steps to be 
followed in the event additional insurance is 
required as when no insurance exists. 
c. Home Equity and Second Mortgages 
Flood insurance is required on designated 
home equity or second mortgage loans made 
by regulated lenders if the loans are secured 
by a building or a manufactured (mobile) 
home/travel trailer, regardless of the lien 
priority. Lenders also need to be cognizant 
that GSEs have specific provisions in their 
sales guides that mandate flood insurance on 
designated home equity and secondary 
mortgages. The location of the secured 
property, not the use of funds received on a 
home equity or second mortgage, governs 
whether flood coverage is required. 
Even though home equity and second 
mortgage loans are subordinate to a primary 
loan, the terms of the mandatory purchase 
law apply with equal force. No matter what 
priority its loan may be, a lender remains 
subject to the various provisions of the 1994 
Reform Act, including the notification, 
Standard Flood Hazard Determination Form 
Section C. General Provisions 32 

(SFHDF), and force placement requirements. The standard 30-day waiting period 
(see pages 38-39 and Appendix 6) does not 
apply on home equity loans and second 
mortgages. Coverage is effective at the time 
of application and presentment of premium. 
Subject to the limit on insurance available 
and the requirement cap, a home equity 
lender must protect its interests by having 
coverage in place at the time the loan is 
extended. The lender must make a determination about the flood insurance requirement 
when the application for the loan is made. If 
the first mortgagee otherwise complied with 
the mandatory purchase requirements and no 
remapping has occurred, then no new 
determination is needed for the second 
mortgage or home equity loan. 
For loans with approved lines of credit to be 
used in the future, it may be difficult to 
calculate the amount of insurance for the 
loan because the borrower will be drawing 
down differing amounts on the line of credit 
at different times. In those instances where 
there is no policy on the collateral, the 
borrower must, at a minimum, obtain a 
policy as a requirement for drawing on the 
line. Drawing against an approved line of 
credit does not require further determinations to be made. For administrative 
convenience in ensuring compliance with 
the requirements, a lender may take the 
following alternative approaches: 
 Review its records periodically (at least 
annually) so that as draws are made 
against the line or repayments made to 
the account, the appropriate amount of 
insurance coverage can be maintained; 
or 
 Upon origination, require the purchase 
of flood insurance for the total amount 
of all loans or the maximum amount of 
flood insurance coverage available, 
whichever is less. 
If a secondary lienholder determines that a 
first mortgagee has neglected to obtain flood 
insurance coverage, the secondary lienholder must be assured that coverage is 
purchased on the entire outstanding loan 
amount in order to comply with the statutory 
requirements as well as to protect its priority 
as to insurance proceeds. Similarly, if the 
first mortgage has insufficient coverage, the 
borrower must cure this deficiency by 
purchasing additional coverage sufficient to 
protect all outstanding loans. If not, the loan 
should not be made. Apart from the 
provisions of the 1973 Act, the lender can 
rely on the hazard clause of the home equity 
or second mortgage loan document in 
requiring coverage in any underinsured 
situation. 
Because only one NFIP policy can be issued 
on a building, no matter how many loans 
exist, a secondary lienholder must verify 
that any required escrow of premium is 
being undertaken by the primary lienholder 
(see the escrow discussion on pages 39-40). 
Accordingly, the lienholder must coordinate 
coverage through its borrower and the 
insurance agent of record. A home equity 
and secondary lienholders interest is 
accomplished by endorsement to the policy. 
Evidence of coverage can be confirmed by 
receipt of a copy of the flood insurance 
application and premium payment from the 
agent or a revised declarations page from the 
insurer. A secondary lienholder should 
ensure that its interest is protected by having 
its name appear on the policy or by other 
appropriate means. If the existence of a 
home equity loan or a second mortgagee is 
not made known to the insurer, appropriate 
renewal notices may not be sent. 
The 1994 Reform Act provides an 
exemption from the mandatory purchase 
requirements for any loan made with an 
original outstanding principal balance of 
$5,000 or less, and with a repayment term of 
1 year or less. The dual criteria must be met 
in order for this exemption to apply. There is 
no exemption for home equity or second 
mortgage loans unless they meet these 
exceptions. 
33 Section C. General Provisions 

d. Notification Requirements 
Under the 1994 Reform Act, all regulated 
lenders and Federal agency lenders must 
provide the following notices: 
 Notification to Borrower, otherwise 
known as Notice of Special Flood 
Hazard and Availability of Federal 
Disaster Relief Assistance 
 Notification of Change of Servicer. 
In addition, the lender should receive an 
Expiration Notice from the insurer. These 
three notices are discussed below (also see 
Appendix 4, Notice Requirements). 
A lender also must complete the SFHDF 
(see Appendix 3, Standard Flood Hazard 
Determination Form) prior to concluding 
loan processing. 
(1) Notice of Special Flood Hazard and 
Availability of Federal Disaster Relief 
Assistance 
Lenders must provide written notification to 
those prospective borrowers whose loans 
secure a building located in an SFHA. The 
purpose of the notice is to advise the 
borrower about the Federal flood insurance 
coverage requirements and whether Federal 
disaster relief assistance is available in that 
location. In the case of multiple applicants 
on a single loan, the lender and borrowers 
typically designate the borrower to whom 
the notice will be provided. Lenders may 
provide multiple notices at their discretion. 
Two sample notices are included in Appendix 4 of these guidelines. These samples 
inform the borrower of the flood insurance 
requirements in an NFIP participating 
community and the implications when a 
community does not participate. A lender 
may comply with the notice requirement by 
using a sample form, or using the required 
language. Even if the format of the sample 
form is personalized and changed, it must 
still provide the borrower with the minimum 
information required by law. 
Section C. General Provisions 34 
The notice must be provided a reasonable 
time before completion of the loan 
transaction to ensure that a flood zone 
determination is made as a condition of a 
loan being closed. The regulations do not 
establish a fixed time period in which a 
lender must provide the notice. What 
constitutes a reasonable time will 
necessarily vary according to the circumstances of the particular transaction. Timely 
completion and delivery of the notice serves 
both to inform the borrower and to protect 
the lender. 
In lieu of giving direct notice, a financial 
institution may obtain adequate assurances 
in writing, from the seller or lessor of the 
building, that the borrower has been advised 
of all required information by the lender 
prior to settlement. However, even if the 
notice is handled by a third party, the lender 
remains responsible for determining the 
buildings location in the flood zone and 
whether it is subject to the mandatory purchase requirements, and providing further 
notification to the borrower. 
The regulations also require a lender to 
extend this notification to any servicer of the 
loan. A lender must notify the servicer as 
promptly as possible after notifying the 
borrower, and in any event not later than the 
time that loan data such as hazard insurance 
and tax information is transmitted to the 
servicer. The notice may be provided in the 
same form as the notice to the borrower. 
This provision applies even if the servicer is 
affiliated with the lender. 
The text of the Notice of Special Flood 
Hazard and Availability of Federal Disaster 
Relief Assistance must include the 
following: 
 A general warning with respect to the 
chance of flooding 
 A description of the mandatory purchase 
requirements 

 An explanation of the eligibility 
requirements to receive disaster relief 
 A discussion of the availability of flood 
coverage through: 
 An insurance agent from the NFIP 
Direct Program (NFIP Servicing 
Agent) 
 A WYO Program insurer 
 A private flood insurer. 
The forms also reference the review or 
appeal process through which a disputed 
flood hazard determination may be jointly 
submitted to FEMA for a final determination 
on whether a building or manufactured 
(mobile) home is located in an identified 
SFHA. The appeal process is explained 
more fully on pages 14-19, under Letters of 
Map Change (LOMCs) and Appeal Options. 
The notice form for loans in nonparticipating communities is designed to 
advise borrowers whose property is located 
in an SFHA in those communities where 
NFIP flood insurance is unavailable. As 
stated earlier, a lender may choose to make a 
conventional loan in an SFHA in a 
nonparticipating community. However, loans 
guaranteed or insured by the government 
(e.g., SBA, VA, and FHA loans) are not 
permitted to be made in those communities. 
Lenders must retain a record or evidence of 
the borrowers receipt of the notice 
throughout the period the lender owns the 
loan. This record can be the borrowers 
statement or initials that the notice was 
received directly, or the U.S. Postal Service 
return receipt in either hard copy or 
electronic format. The lender need not retain 
a hard copy version of the notice to the 
borrower and loan servicer. 
The applicability of this notice requirement 
to manufactured (mobile) homes is discussed on page 31. 
(2) Notification of Change of Servicer 
If a loan on a secured property in an SFHA 
is sold or transferred, a regulated lender 
must notify FEMAs designee of the identity 
of the new loan servicer. FEMAs designee 
is the flood insurance company listed on the 
policy. 
When a policy is written, the agent fulfills 
the notice requirement by indicating on the 
policy application the name of the 
mortgagee who is to receive notices. The 
obligation on the part of the seller of the 
loan to inform FEMAs designee is also 
triggered each time the loan is assigned or 
transferred to another lender or servicer. The 
notice is to be sent to either the WYO 
insurer (directly or through the agent of 
record) or to the NFIP Servicing Agent if 
that entity is the insurer. 
This notice requirement may be accomplished by utilizing whatever electronic or 
hard copy format the parties generally use. 
The regulators acknowledge the use of the 
RESPA Notice of Transfer of Servicing 
form, designed to advise a borrower of the 
replacing servicers identity, as sufficient to 
meet this requirement if it contains all 
relevant information. 
The information needed by the FEMA 
designee includes: 
 Borrowers name 
 Flood insurance policy number 
 Property address (including city and 
state) 
 Name of lender or servicer making 
notification 
 Name and address of new servicer 
 Name and telephone number of contact 
person at new servicer. 
35 Section C. General Provisions 

The notification of the identity of the 
servicer is accomplished through a general 
change endorsement, which is completed 
and submitted to the WYO insurer or NFIP 
Servicing Agent by the insurance agent of 
record. 
The law requires this notification to be sent 
by the incumbent lender or servicer to the 
insurance company or agent not later than 
60 days after the effective date of such 
change. This duty to notify is, in turn, 
passed along to the new (transferee) 
regulated lender or servicer upon subsequent 
change of servicer. 
This notice procedure accomplishes several 
objectives: 
 It makes the insurer aware of the identity 
of the party designated to receive 
mailings such as expiration and policy 
renewal premium notices, which the 
insurer must mail 45 days prior to the 
expiration date. 
 It eliminates any failure on the part of 
subsequent lenders or servicers to notify 
the insurance agent or insurer of a 
change in a mortgagee (or servicer) in 
order to enable renewal and/or 
expiration notices to be sent to the 
proper lender or servicer of the loan. 
 This requirement is designed to combat 
the high nonrenewal rate that occurs 
after the first year of the loan. For 
example, when the insurance payments 
are not escrowed, without the updated 
information the mortgagee or servicer 
could not verify whether the borrower 
continued to renew the policy or allowed 
it to lapse. 
The regulations make no provisions as to 
recordkeeping of the change of servicer 
form; however, the lender and servicer have 
the burden to demonstrate the notice was 
given. 
If one institution acquires or merges with 
another, the successor institution must 
Section C. General Provisions 36 
provide notice for the loans being serviced 
by the former institution if the former 
institution did not provide notice prior to the 
effective date of the acquisition or merger. 
Although the statute requires the Administrator of FEMA or the Administrators 
designee to be notified when servicing is 
transferred, neither the statute nor the regulations require notice when a loan is paid off. 
(3) Expiration/Renewal Notice 
The 1994 Reform Act and the SFIP both 
require the Administrator of FEMA 
(regarding NFIP Direct business) and the 
Administrators designee (i.e., a WYO 
carrier on WYO policies) to send a notice of 
the date of expiration of the policy contract. 
This expiration/renewal notice must be sent 
by first-class mail, not less than 45 days 
prior to expiration, to the last known address 
of the insured, any known mortgagees, 
servicer, and the owner of the property. 
FEMA interprets the term owner of the 
property as used in the statute to mean the 
party insuring the risk. An expiration/ 
renewal notice is also mailed to the 
insurance producer. The law does not 
require proof of receipt of the notice. The 
statutory notice provisions are in addition to 
any applicable terms and conditions 
provided in the SFIP, as well as any 
obligation found in the mortgage or lending 
document between the borrower and lender. 
Under the provisions of the SFIP, the WYO 
insurer and the NFIP Servicing Agent also 
must notify the lender, or servicer acting on 
behalf of the lender, along with the 
borrower, when the insurance contract is due 
for renewal. 
e. Standard Flood Hazard 
Determination Form 
Independent of the notice requirements, a 
separate provision was added in Section 528 
of the 1994 Reform Act, 42 U.S.C. 4104b, 
requiring the lender to document a loan by 

entering information on the SFHDF. The 
SFHDF has been designed to facilitate 
notification of special flood hazards. 
However, the law requires the form to be used 
for all loans, not only those for which the 
building or manufactured (mobile) home is in 
an SFHA. 
The authorizing regulation is found at 44 CFR 
65.16. The regulation requires that the flood 
zone determinationZones A or V (SFHAs), 
or Zones B, C, or X (low-to-moderate flood 
risk areas)and community status be entered 
on the most recent version of the SFHDF. The 
current form, and instructions for completing 
it, are provided in Appendix 3. These 
materials are also available at 
http://www.fema.gov/business/nfip/sfhdform.s 
htm, where any future updates to them will be 
posted. 
A buildings location and its communitys 
participation in the NFIP may mandate the 
purchase of flood insurance. If the building 
or manufactured (mobile) home offered as 
security for a loan is located in Zones A or 
V (SFHAs), mandatory flood insurance 
purchase requirements are triggered. If the 
community participates in the NFIP, 
federally backed flood insurance is available 
and federally backed mortgages may be 
issued. Private flood insurance may also be 
available on a limited basis. 
Lenders should consult their Federal 
regulatory authorities for procedures 
applicable to these and other outcomes, such 
as buildings in Zones B, C, or X (low-tomoderate flood risk) or communities not 
participating in the NFIP. Mortgage 
documents may reserve the rights of lenders 
to require flood insurance protection that 
exceeds the minimum requirements under 
the law. 
Lenders will use the SFHDF to document 
the process of determining whether or not 
flood insurance should be required in 
connection with a given mortgage loan 
transaction, while Federal banking entities 
will use it to monitor compliance by lenders. 
The form will document that a determination 
was made for a building or mobile home, 
whether it is in or out of the SFHA, whether 
flood insurance is required, and whether 
Federal flood insurance is available. 
GSEs, such as Fannie Mae and Freddie 
Mac, also require the use of the SFHDF. 
See links to announcements and guidelines 
at http://www.efanniemae.com and 
http://www.allregs.com/fhlmc/. 
(1) Determination Process 
The lender must take the responsibility for 
making flood zone determinations, either by 
making the determination internally or 
acquiring determination services from a 
third party (see pages 11-12). FEMA does 
not perform individual property flood hazard 
determinations. The 1994 Reform Act states 
that the lender may provide for the 
acquisition or determination of flood hazard 
information to be made by a person other 
than the lender only to the extent that such 
person guarantees the accuracy of the 
information. Neither FEMA nor the lending 
regulators have designated standards for 
what constitutes an adequate guarantee of 
the information provided to justify reliance 
upon the data. 
A previous determination may not be reused 
when making a new loan. If the loan is not 
new, i.e., if the transaction pertains to 
increasing, extending, renewing, or purchasing an existing loan, the determination 
can be reused if: 
 It is less than 7 years old; and 
 No new or revised FIRM or FHBM has 
been issued in the interim; and 
 It was initially recorded on the SFHDF. 
If a borrower obtains a home equity or 
second mortgage from its first mortgagee 
that is secured by a secondary lien position, 
and provides evidence that adequate flood 
insurance coverage is in place for all loans, 
the lender can rely upon the original SFHDF 
37 Section C. General Provisions 

if no remapping has occurred. The regulators will impose no penalty if the prior 
determination meets the above requirements. 
Once a new map has been issued, a lender 
must use that map as a guide, and a new 
determination is required for a triggering 
event. Any disputes that arise between the 
lender and borrower concerning the location 
of a building in relation to an SFHA are 
eligible to be resolved in accordance with 
the review process described on pages 
14-19. 
(2) Instructions for Using the SFHDF 
The reverse side of the SFHDF has detailed 
section-by-section instructions for completing 
the form. A separate SFHDF is required for 
buildings on adjacent properties. However, 
if a single property contains multiple 
buildings, a listing of buildings on the parcel 
can be attached to the SFHDF. Only one 
building may be insured under one NFIP 
policy. Each building securing a loan must 
be covered by a separate policy. 
The SFHDF may be used in a printed, 
computerized, or electronic manner and 
must be retained for the life of the loan in 
either hard copy or electronic format. Any 
alternative electronic format used by lenders 
must contain all mandatory fields indicated 
on the SFHDF. 
The form need not be kept in the loan file, 
but a lender is expected to be able to retrieve 
the record within a reasonable time period 
upon being requested by its Federal 
supervisory agency. Lenders are neither 
required to provide nor prohibited from 
providing the WYO insurer, insurance 
agent, or the borrower with a copy of the 
form. 
Lenders and servicers cannot accept some 
form of self-certification or assurance from 
the mortgagor-borrower that the building is 
not in an SFHA. If the lender wishes to 
change its original determination of the 
buildings location based on information 
submitted by the mortgagor, the lender/ 
servicer must conclude that its original 
determination was in error and make any 
change on the basis of its review of that new 
information. The ultimate responsibility for 
making such determinations about a 
buildings flood zone location rests with the 
mortgagee, not the mortgagor. As previously 
noted, contested determinations are subject 
to the FEMA review process. 
f. Waiting Period and Exceptions 
The 1994 Reform Act requires a 30-day 
waiting period to effect coverage under a 
new contract for flood insurance and any 
modification to coverage under an existing 
flood insurance contract. The express intent 
of Congress in mandating a 30-day waiting 
period was to prevent the purchase of flood 
insurance at times of imminent flood loss. 
Exceptions to this standard 30-day wait are 
as follows: 
(1) Coverage Obtained in Conjunction 
with a Loan 
Exceptions to the standard 30-day waiting 
period apply when coverage is placed in 
conjunction with loan activity or the 
remapping of a community. The 1994 
Reform Acts initial purchase provision 
states that the 30-day waiting period does 
not apply to the following instances: 
 The initial purchase of flood insurance 
. . . when the purchase is in connection 
with the making, increasing, extension, 
or renewal of a loan; or 
 The initial purchase of flood insurance 
. . . pursuant to a [map] revision or 
updating of floodplain areas of flood 
zones within a 1-year period. 
The effective date of coverage is 12:01 a.m. 
(local time) on the first calendar day after 
the application date and the presentment of 
premium. 
It is significant to note that the first 
exception described above to the 30-day 
Section C. General Provisions 38 

waiting period (when the initial purchase of 
flood insurance is in connection with the 
making, increasing, extension, or renewal of 
a loan) is much broader than it appears. 
FEMA has interpreted the exception to the 
30-day waiting period to apply in situations 
pertaining to refinancing, placement of 
second mortgages, and modification of 
existing mortgages. This exception also 
applies to force placement, increased limits 
at renewal, and map revisions. For a detailed 
description of the waiting period rules, refer 
to Appendix 6, 30-Day Waiting Period. 
(2) Assignment of Policy 
There is a 30-day waiting period before 
coverage can go into effect when an NFIP 
policy is assigned from a seller to a buyer 
where the buyer does not obtain a mortgage. 
If the buyer obtains a mortgage, the waiting 
period does not apply. 
g. Escrow Requirements 
The escrow requirement of the 1994 Reform 
Act is limited to instances where a lender 
establishes an escrow account for a loan for 
another purpose. If financial institutions and 
their servicers require the escrow of taxes, 
insurance premiums, or any other fees or 
charges for covered loans, they must also 
escrow for premiums and fees for flood 
insurance. 
(1) Real Estate Settlement Procedures Act 
The mandatory purchase law expressly 
states that escrow accounts established 
under the 1973 Flood Disaster Protection 
Act are subject to the escrow account 
provisions of Section 10 of the Real Estate 
Settlement Procedures Act (RESPA) of 
1974, which imposes accounting and notice 
obligations on a lender for consumer loans. 
Lenders must escrow premiums and fees for 
any required flood insurance if the lender 
requires escrow for other purposes such as 
hazard insurance or taxes. 
RESPA, which generally limits the amount 
that may be maintained in escrow accounts, 
and requires notices containing escrow 
account statements for those accounts, 
applies primarily to escrow of consumer 
loans. Generally, this means that only loans 
on one- to four-family dwellings will be 
subject to the RESPA escrow rules. Loans 
on multi-family dwellings of five or more 
units are not covered by these RESPA 
requirements. 
Although the escrow provision applies only 
to residential loans, lenders are encouraged 
to escrow on all loans, including those on 
non-residential improved real estate. 
(2) Applicability 
Unlike the RESPA escrow requirements, the 
escrow of flood insurance includes not only 
single-family buildings, but also multifamily properties containing five or more 
residential units. Consequently, escrow on 
certain residential real estate is required, 
even though the property may be secured 
under a commercial or business loan. The 
1994 Reform Acts escrow provision applies 
to both home mortgage loans and commercial loans (including, for example, 
mortgages on apartment buildings or 
construction loans secured by residential 
buildings), but only if the lender requires the 
escrow of other charges for those loans. 
The mandatory purchase provisions make no 
distinction between single or multi-family 
dwellings or owner or renter occupancy. The 
lender is to consider the primary use of the 
building in making its determination. For 
example, if a building is a mixed-use 
property, i.e., part residential and part 
commercial, the primary use of the building 
controls. 
Escrowing on all manufactured (mobile) 
home designated loans is required under the 
1994 Reform Act, even though RESPA 
requires escrowing only if the loan 
encompasses the land upon which the home 
is situated. 
39 Section C. General Provisions 

The 1994 Reform Acts escrow provisions 
apply to financial institutions and their 
servicers, but do not apply to mortgage 
company originators over whom a Federal 
regulator has no jurisdiction. 
Regulators will examine the loan practices 
of the lender to determine if the escrow is 
required. If a lenders loan practices indicate 
that escrow is normally required and the 
loan documents permit escrow accounts to 
be established, the regulators presume that 
an escrow account for flood insurance 
premiums also should be established in the 
event flood insurance is mandated. Various 
escrow-type accounts established for loans 
involving multi-family properties that are 
substantially different in purpose from 
single-family residences (e.g., interest 
reserve accounts and compensating balance 
accounts) do not constitute escrow accounts 
under the mandatory purchase requirements. 
The law stipulates that, if an escrow account 
is required, it must be set up in a manner 
sufficient to make payment as due for the 
duration of the loan. 
The flood escrow requirement facilitates the 
lender making payments as due for the life 
of the loan. In the past, a significant number 
of lenders did not require escrowing of flood 
insurance coverage; in those situations, 
NFIP coverage was susceptible to lapse. 
The escrow practices are designed to 
balance the need to increase participation 
with the desire to prevent significant 
burdens on lenders and borrowers. 
Requiring lenders to escrow for flood 
insurance premiums may significantly 
improve participation in the NFIP and 
reduce the probability of lapsed coverage. 
(3) Escrow Exclusions 
The escrow provision for flood insurance is 
not triggered in the following situations: 
 Voluntary escrowing for credit life 
insurance 
 Establishing accounts in connection 
with commercial loans for such items as 
interest or maintenance reserves or 
compensating balances. (Generally, accounts established in connection with 
the underlying agreement between the 
buyer and seller, or that relate to the 
commercial venture itself, rather than to 
the protection of the property, would 
not trigger the escrow requirements for 
flood insurance premiums.) 
 Voluntary escrowing for other expenses 
(Escrowing is not required, but 
established at the borrowers request.) 
 Lender termination of an escrow 
account for a loan. 
h. Force Placement 
(1) Authority 
Similar to the requirements concerning the 
issuance of the various notices and escrow, 
the 1994 Reform Act places responsibility to 
force place on lenders as well as servicers. 
The Act requires the force placement of 
flood insurance if a servicer or lender 
determines that the building securing the 
loan is not adequately insured. The 1994 
Reform Act also grants statutory authority to 
a lender or servicer to purchase flood 
insurance for the building and charge a 
premium to the borrower if the building is in 
an SFHA. 
By enacting this portion of the law, 
Congress intended lenders to have clear 
authority to force place; under certain 
circumstances, they are obligated to force 
place. The force placement of coverage is 
designed for use at any time during the term 
of a loan in uninsured and underinsured 
situations; it is not intended for use at loan 
origination. If a borrower refuses to obtain 
flood insurance coverage as a condition of 
obtaining a loan, the loan is deficient and is 
not to be made. 
Section C. General Provisions 40 

If at any time during the term of a covered 
loan, the lender or servicer determines that 
the building securing the loan is not covered 
by flood insurance, or is covered by such 
insurance in an amount less than that 
required by law, the lender or servicer must 
first notify the borrower of the need to carry 
adequate flood insurance coverage. The law 
does not specify the precise wording of this 
notice, so lenders and servicers should give 
a close reading to the statute and regulations 
for guidance. The notice must state that the 
borrower should, at the borrowers expense, 
obtain flood insurance that is not less than 
the amount required by law. 
If the borrower fails to purchase such flood 
insurance within 45 days after such 
notification, the lender or servicer shall 
purchase the insurance on behalf of the 
borrower and may charge the borrower for 
the cost of premiums and fees incurred by 
the lender or servicer. In an underinsured 
situation, when the borrower and/or agent of 
record refuse to cooperate with the new 
lender, the loan should not be made. If the 
loan has already been extended, the lender 
should exercise recourse as provided under 
the terms of the loan document. 
The standard 30-day waiting period 
established by the 1994 Reform Act does 
not apply to force-placed policies; instead, 
the 45-day period from time of notification 
that a lender must grant to a borrower to 
voluntarily obtain coverage is the only time 
delay that controls. 
The 1994 Reform Act contains preemption 
language stating that the NFIP force 
placement provisions prevail over state and 
local law. The language is significant 
because many of the state laws that cover 
force placement are vague and open to 
interpretation. In addition, the language 
responds to those state laws that prohibit or 
limit force placement, or require the 
borrowers contractual agreement in order to 
force place coverage. 
(2) Applicability 
The terms of the force placement law are 
broader in scope than the escrow 
requirement. Force placement applies to any 
borrower of a designated loan, commercial 
or residential, whether or not escrow of 
expenses is required. On any type of force-
placed policy, a lender should keep evidence 
of the determination that the loan is in an 
SFHA, including information concerning the 
FIRM panel and method by which the 
determination was made. 
Home equity and second mortgage loans 
also are included under the requirement. A 
secondary lienholder that force places 
coverage only to the extent of its loan will 
not protect its interest if a first mortgagee 
claims priority to any insurance proceeds. 
Force placement by a second mortgagee will 
require coordination with the first 
mortgagee, as well as with the insurance 
producer and insurer on the first mortgage, if 
one exists. 
The 1994 Reform Act requires a lender to 
carry out the force placement as a matter of 
law, independent of the contractual provisions of the loan. Force placement is not 
limited to those situations provided for 
under the mandatory purchase law. 
The standard Fannie Mae and Freddie Mac 
documents provide that the lender may 
obtain the force-placed insurance at the 
borrowers expense. 
The amount of insurance coverage must be 
at least the lowest of the outstanding 
principal balance of the loan(s), the 
insurable value of the structure, or the 
maximum limit available under the NFIP. If 
the lender opts to protect only its security in 
the loan (loan balance), the insurance 
proceeds may be inadequate. 
Force placement of flood insurance is 
intended only as a last resort, and on 
mortgages whose mortgagors have failed to 
respond to the notifications required by law. 
41 Section C. General Provisions 

The 1994 Reform Act provides that a lender 
must inform its borrowers that they have a 
free choice of an insurer from whom to 
purchase coverage. That free-choice purchase option also applies to a lender when 
dealing with force-placed coverage. If, 
within 45 days from the initial notice, a 
borrower fails to comply by voluntarily 
obtaining coverage, a lender or servicer 
must obtain either: 
 A Mortgage Portfolio Protection 
Program (MPPP) policy through a WYO 
insurer; or 
 An SFIP through either a WYO insurer 
or the NFIP Servicing Agent; or 
 Non-NFIP flood coverage from a private 
industry insurer if such coverage is 
available. 
(3) MPPP Method of Placement 
Most loans for which flood insurance is 
force placed must be processed with a 
limited amount of underwriting information. Therefore, placement is appropriate 
through the MPPP, where only limited 
underwriting information is required. 
The MPPP is an optional program 
designed for lenders to force place flood 
insurance coverage under the NFIP with 
WYO insurers that have agreed to comply 
with the requirements of the MPPP. A list 
of companies that write MPPP coverage is 
available at http://www.fema.gov/nfip/wyo.shtm. 
The NFIP Direct Program does not offer 
the MPPP. The procedure for using the 
MPPP is part of the regulations. Questions 
and answers about the MPPP are included in 
Appendix 7. 
The MPPP is an annual policy and, although 
it cannot be renewed, it can be rewritten 
each year if the required procedures are 
followed. Rating under the MPPP policy is 
based on the flood map in effect at the time 
the policy is written. Because adequate 
underwriting data seldom is available, the 
rates allowed to be charged for force-placed 
policies are considerably higher than rates 
for voluntary policies. The MPPP policy is a 
dual-interest contract covering both the 
borrower and the lender. 
(4) Standard NFIP Policy 
A lender may be able to force place flood 
insurance protection via the Standard Flood 
Insurance Policy (SFIP). This requires 
adequate underwriting information, possibly 
from the lapsed flood policy, or with help 
from the former insurance agent. The SFIP 
is generally less costly than the MPPP. 
The borrower has 45 days, after initial 
notification of the need to obtain flood 
insurance, to purchase a policy. After that 
time, if the lender has sufficient information 
to produce a policy, it may place a policy 
with an agent of its choice. This method of 
insuring the risk does not require the use of 
any specific notice to the borrower. 
(5) Private Flood Insurance 
A lender has the option of force placing 
flood insurance through a private (non-
NFIP) insurer. If private insurance is 
available, the lender also must consider 
whether the policy, as well as the insurer, is 
acceptable to its regulator by meeting the 
criteria established by FEMA. The FEMA 
criteria for acceptance of private flood 
insurance are fully described on pages 
57-58. 
i. Exceptions 
(1) State-Owned Property 
If the security property is state-owned and 
covered by adequate policies of self-
insurance, flood insurance is not required. A 
list of states with adequate self-insurance 
programs can be found at 44 CFR, Chapter 
1, Part 75. This exemption, by its terms, 
applies only to state-owned property, and 
not county- or city-owned property. 
Section C. General Provisions 42 

(2) Small Loan 
The 1994 Reform Act provides an 
exemption from the mandatory purchase 
requirements for any loan made with an 
original outstanding principal balance of 
$5,000 or less, and with a repayment term 
of 1 year or less. The dual criteria must be 
met in order for this exemption to apply. 
There is no exemption for home equity or 
second mortgage loans unless they meet these 
exceptions. 
43 Section C. General Provisions 

SECTION D 
CONDOMINIUMS, COOPERATIVES, TIMESHARES
The mandatory purchase of flood insurance 
requirements apply with equal force to 
condominium, cooperative, and timeshare 
units. Placing and monitoring coverage on 
units within multi-unit buildings presents 
special circumstances to lenders and merits 
particular care. The statutory requirements 
can be explained through a review of how 
the various National Flood Insurance 
Program (NFIP) policies correspond to the 
forms of ownership as follows: 
 The Residential Condominium Building 
Association Policy was designed for 
eligible residential condominium associations, and timeshares that are of the fee 
or real estate ownership type, in Regular 
Program Communities. 
 The General Property Form policy 
applies to residential cooperatives and 
timeshares that are non-fee interest and 
residential condominium buildings not 
eligible for the Residential Condominium Building Association Policy. 
The General Property Form policy also 
applies to non-residential condominiums 
and unit owners. 
 The Dwelling Form policy may be 
issued on an individual residential unit. 
For eligibility requirements and limits 
available on the various coverages under 
these policies, refer to the Condominiums 
section of the NFIP Flood Insurance 
Manual, or consult property insurance 
professionals for assistance. 
1. Condominium Association 
Responsibilities and Statutory 
Requirements 
Condominium association board members 
have a fiduciary responsibility to unit 
owners to protect the common property by 
assuring that appropriate insurance coverage 
is in place. This responsibility often includes 
providing adequate flood insurance to 
protect buildings located in Special Flood 
Hazard Areas (SFHAs). Options for placing 
flood insurance on condominium buildings 
are described below. 
a. Residential Condominium Building 
Association Policy (RCBAP) 
The RCBAP is the policy specifically 
designed for condominium associations to 
insure residential condominium buildings. 
Under the RCBAP, the association is able to 
manage flood insurance needs and by-law 
requirements without relying on the actions 
of the unit owners. 
Although the statutory requirements apply 
with equal force to condominium unit 
owners and their lenders, the practice of the 
lending industry, as followed under the 
RCBAP, is to defer to the association to 
ensure compliance. While the association 
does not bear mortgage responsibility on the 
individual units, its interest springs from the 
obligation to maintain and repair the 
premises for the community benefit and unit 
owners as tenants in common. A key feature 
of the condominium insurance format is the 
separate ownership and mortgaging of 
individual units, yet the insuring of the 
building as a whole with a policy issued to 
the association only. It should be noted that 
lenders are still responsible to meet their 
compliance requirements under the law. 
A unit owners mortgage lender has no 
direct interest in an RCBAP and is not to be 
listed as an additional named insured on the 
policy declaration page. 
The 30-day waiting period applies to the 
RCBAP, unless the condominium 
association is purchasing flood insurance 
required by the associations mortgage 
company. 
45 Section D. Condos, Coops, Timeshares 

Because the RCBAP provides flood 
insurance protection for both the building 
elements within the unit and the common 
building elements, the security interests of 
individual unit owner mortgagees should be 
protected, so long as coverage amounts 
reflect insurance to value, as with other 
forms of property insurance. Although unit 
owners have a shared interest in the 
common areas of the condominium building, 
as well as in their own unit, unit owners are 
unable to individually protect such common 
areas. Therefore, the RCBAP, insured to its 
full replacement cost value (RCV) to the 
extent possible under the NFIP, is the 
correct way to insure a residential 
condominium building against flood loss. A 
properly placed RCBAP protects the 
financial interests of the association, unit 
owners, and lenders and also satisfies the 
statutory requirements. 
The premium for the RCBAP is assessed as 
part of the unit owners association dues. 
Proportionately, the RCBAP costs each unit 
owner less than if each unit owner were to 
purchase his or her own flood insurance 
policy that would cover the unit. An eligible 
condominium association should purchase 
flood insurance coverage under the RCBAP, 
even though individual owners may not have 
mortgages on their units. 
(1) Statutory Requirements 
The flood insurance amount required by 
statute for an applicable loan on a 
condominium unit must be at minimum the 
lowest of, but may exceed, the following: 
 The outstanding balance of the loan(s); or 
 The insurable value (replacement cost 
value) of the unit; or 
 The maximum amount of insurance 
available under the NFIP for the type of 
property. 
Once the minimum amount required to 
fulfill the statutory requirement is identified 
from the above example, it is compared to 
the portion of the RCBAP limit attributable 
to the unit. If the units portion of the 
RCBAP equals or exceeds the minimum 
amount required by law, the loan is 
compliant, but not necessarily adequately 
insured against flood loss. If the units 
portion of the RCBAP is less than the 
minimum amount required by statute, the 
association should be asked to increase its 
limits. If the association refuses, the unit 
owner may purchase flood insurance under 
the Dwelling Form for the difference, if 
acceptable to the lender. Meeting the 
compliance requirement via this combination of coverages (RCBAP and Dwelling 
Form) does not fill gaps in coverage nor 
ensure that the security is adequately 
protected against flood loss. 
If there is no RCBAP, the unit owner can 
meet the minimum statutory requirement by 
purchasing a Dwelling Form policy at least 
equaling the minimum required amount, if 
acceptable to the lender. 
(2) Evidence of Compliance 
As a condition of making, increasing, 
extending, or renewing a loan on the 
residential condominium unit and as 
frequently as required, a mortgagee must 
obtain: 
 A copy of the RCBAP documenting the 
amount of insuranceideally, insured to 
RCV, or at least the units portion 
equaling the statutory requirement. 
(Effective October 1, 2007, the 
Declarations Page of each RCBAP 
issued or renewed must show the 
buildings replacement cost value and 
the number of units within that 
building.); or 
 A copy of the RCBAP and Dwelling 
Form (or application and paid receipt) 
jointly equaling at least the minimum 
Section D. Condos, Coops, Timeshares 46 

statutorily required amount of insurance; 
or 
 A copy of the Dwelling Form equaling 
the minimum amount required to meet 
statutory requirements. 
While any of these insurance methods might 
meet the statutory requirements, an RCBAP 
not insured to full value and/or a Dwelling 
Form policy could expose the lender and 
borrower to unknown risk. 
FEMA suggests the following simple way to 
address both compliance requirements and 
flood insurance needs for safety and 
soundness of collateral interests. Lenders 
may apply a risk management strategy, as a 
condition to granting loans secured by 
condominium units in high-flood-risk areas, 
by requiring that condominium buildings be 
insured under the RCBAP to their full RCV 
or the maximum amount available, 
whichever is less. The compliance 
requirement is then equaled or exceeded 
with no additional calculation necessary. 
(3) Coverage 
The entire residential condominium building 
is covered under the RCBAP, including both 
common building elements and individually 
owned building elements within the units, 
improvements within the units, and personal 
property owned in common if contents 
coverage is carried. The RCBAP does not 
protect the individual owner from loss to 
personal property owned exclusively by the 
unit owner. 
The NFIP prohibits duplication of NFIP 
policies on the same risk. As described 
below, both an association and a unit owner 
may obtain NFIP coverage, but the unit 
owners coverage is proscribed in that it is in 
excess of the association policy. The 
combined coverage of the RCBAP and the 
unit owner Dwelling Form policy cannot 
exceed the statutory limits or insurable 
value, whichever is less. The RCBAP is 
primary in relation to the unit owners 
policy. 
(4) Policy Limits 
As of this edition, the maximum amount of 
building coverage that can be purchased on 
a high-rise or low-rise condominium under 
the RCBAP is the replacement cost value of 
the building or the total number of units in 
the condominium building multiplied by 
$250,000, whichever is less. The maximum 
coverage limit under the NFIP for contents 
is $100,000 or the replacement cost value of 
the contents, whichever is less. Contents 
coverage losses under the NFIP are settled 
on the basis of actual cash value. 
(5) Valuation 
FEMA encourages lenders to seek the 
assistance of insurance agents and 
companies to determine the replacement 
cost value of residential condominium 
buildings, including the foundations. 
Any building at risk of flooding should be 
protected to the same degree as it is for fire 
and wind perils, to the extent possible under 
the NFIP policy limits, which are 
established by Congress. 
(6) Coinsurance Provision 
Under the RCBAP, associations have an 
incentive to purchase and maintain coverage 
in an amount equal to the cost of replacing 
the building and its foundation, to the extent 
possible under the NFIP limits. FEMA 
encourages condominium associations to 
insure their building to 100 percent of the 
full replacement cost value, because 
construction costs continue to increase while 
the RCBAP limits do not automatically 
increase over time. At the time of loss, the 
amount of insurance should represent at 
least 80 percent or more of the replacement 
cost or the maximum amount of coverage 
available under the NFIP, in order to avoid 
the coinsurance penalty. The 80 percent 
referenced here is an insurance tool that may 
apply at the time of loss; it is not a 
compliance tool. 
47 Section D. Condos, Coops, Timeshares 

If the 80 percent threshold is met, the NFIP 
will pay compensable partial losses up to the 
limits of the policy minus any deductible. 
When an association carries limits to full 
replacement cost value, the unit owner does 
not need to obtain supplemental building 
coverage to offset a potential assessment in 
a total loss situation. The RCBAPs policy 
limits exclusively, and no additional 
separate policy limits (such as the unit 
owners coverage), can apply to avoid the 
coinsurance penalty. For example, a 
Dwelling Form policy limit does not 
increase the RCBAP limit and would not 
avoid the coinsurance penalty. 
Coverage under the RCBAP is on an RCV 
basis so that no deduction for depreciation is 
taken for building elements at loss 
settlement. However, condominium associations are encouraged to insure their 
buildings to full replacement cost value, or 
to the maximum available limit of $250,000 
per unit multiplied by the number of units, 
whichever is less. 
Example of 
RCBAP Coinsurance Penalty 
Building RCV at time of loss $12,500,000 
80% of RCV at time of loss 10,000,000 
Actual amount of insurance carried 6,000,000 
Amount of loss 6,000,000 
Loss settlement (before deductible) 3,600,000 
The amount of insurance carried 
($6,000,000) represents only 60 percent of 
the 80-percent required amount ($10,000,000) 
that avoids the coinsurance penalty. A 
shortage of $2,400,000 therefore results, 
which represents the coinsurance penalty. 
RCBAP
Loss Settlement Formula 
$6,000,000 (ins. amt.) X $6,000,000 (loss) = $3,600,000$10,000,000 (80% of RCV at time of loss) 
Example of Adequate Amount of Insurance, 
Avoiding RCBAP Coinsurance Penalty 
Building RCV at policy purchase $11,000,000 
80% of RCV at policy purchase 8,800,000 
Amt. insurance purchased (RCV) 11,000,000 
Building RCV at time of loss 12,500,000 
80% of RCV at time of loss 10,000,000 
Amount of loss 6,000,000 
Loss settlement (before deductible) 6,000,000 
In the preceding example, insurance was 
purchased to the full RCV of the building at 
$11,000,000. At the time of loss, the RCV of 
the building had risen to $12,500,000. 
Because the actual amount of insurance is 
within 20 percent of the replacement value 
of the building, there is no coinsurance 
penalty. Purchasing insurance to full RCV, 
rather than to 80 percent of the replacement 
cost, should go a long way toward protecting 
the insurable interests of the lender, the 
association, and the unit owner. 
(7) Assessments 
Assessments can be costs that are passed on 
to unit owners by a condominium 
association to cover losses to the common 
areas of the building containing the units 
when the losses are not covered by hazard or 
flood insurance. For more information about 
assessment coverage, see the examples of 
flood loss assessment against unit owners 
and settlement outcomes; examples begin on 
the next page. 
b. Dwelling Form Policy 
(1) Unit Owners Building Coverage 
A unit owner can acquire supplemental 
building coverage to the RCBAP by 
purchasing building coverage for the unit 
under a Dwelling Form that is written in 
excess of the association policy. The 
policies are coordinated such that the 
Dwelling Form policy purchased by the unit 
owner responds to shortfalls on building 
coverages pertaining either to improvements
Section D. Condos, Coops, Timeshares 48 

owned by the insured or to assessments. It 
should be noted that the Dwelling Form 
does not extend the RCBAP limits, nor does 
it enable the association to fill gaps in 
coverage. 
Combined loss payments under the RCBAP 
and Dwelling Form, including assessment 
coverage, cannot exceed the insurable value 
or maximum NFIP limits for building 
coverage. Assessment coverage applies, up 
to the building coverage limits of the 
Dwelling Form policy purchased, when 
there is no association policy (RCBAP). 
Assessment coverage under the Dwelling 
Form applies when there is an RCBAP, but 
only to that part of the loss that exceeds 80 
percent of the building replacement cost 
value. 
(2) Unit Owners Personal Property 
Coverage 
Personal property owned by individual unit 
owners must be insured under an individual 
unit owners Dwelling Form policy. 
With the exception of the non-condominium 
timeshare unit owner, unit owners may 
apply up to 10 percent of their personal 
property coverage limit to flood damage to 
improvements made at the unit owners 
expense. However, this 10 percent of the 
contents coverage limit does not apply if the 
associations General Property Form policy 
maximum limit of $250,000 has been 
reached and/or if the improvements in the 
unit are covered by an RCBAP or a private 
flood insurance policy. Additionally, use of 
the personal property coverage limit is at the 
discretion of the unit owner and reduces the 
contents limit. 
(3) Loss Assessment Coverage 
The following examples demonstrate how 
the unit owners Dwelling Form policy will 
respond in certain loss situations. 
Example ANo RCBAP: 
 If the unit owner purchases building 
coverage under the Dwelling Form and 
there is no RCBAP, the Dwelling Form 
policy responds to assessments against 
unit owners for damages to common 
areas up to the Dwelling Form policy 
limit. 
 However, if there is damage to the 
building elements of the unit as well, the 
building coverage limit under the 
Dwelling Form policy may not be 
exceeded by the combined settlement of 
unit building damages, which would 
apply first, and the loss assessment. 
Example BRCBAP insured to at least 
80 percent of building replacement cost: 
 If the unit owner purchases building 
coverage under the Dwelling Form and 
if there is an RCBAP covering at least 
80 percent of the building RCV, the loss 
assessment coverage under the Dwelling 
Form policy will pay that part of a loss 
that exceeds 80 percent of the 
associations building replacement cost. 
 The loss assessment coverage under the 
Dwelling Form policy will not cover the 
associations policy deductible purchased by the condominium association. 
 If building elements within units have 
also been damaged, the Dwelling Form 
policy pays to repair building elements 
after the RCBAP limits that apply to the 
unit have been exhausted. Again, 
coverage combinations cannot exceed 
the total limit of $250,000 per unit. 
Example CRCBAP insured to less than 
80 percent of building replacement cost: 
 If the unit owner purchases building 
coverage under the Dwelling Form and 
there is an RCBAP that was insured to 
less than 80 percent of the building RCV 
at the time of loss, the loss assessment 
49 Section D. Condos, Coops, Timeshares 

coverage cannot be used to reimburse 
the association for its coinsurance 
penalty. 
 Loss assessment is available only to 
cover the building damages in excess of 
the 80-percent required amount at the 
time of loss. Thus, the covered damages 
to the condominium association building 
must be greater than 80 percent of the 
building RCV at the time of loss before 
the loss assessment becomes available. 
Covered repairs to the unit, if applicable, 
would have priority over loss 
assessments under the Dwelling Form. 
c. General Property Form Policy 
To purchase coverage under the NFIP on a 
nonresidential condominium building, a 
condominium association must use the 
General Property Form. Both building and 
contents coverages are available separately, 
with building and contents limits up to 
$500,000 each per nonresidential building. 
The nonresidential unit owner also may 
purchase contents coverage using this 
policy. A Dwelling Form policy is not 
available to the nonresidential unit owner. 
In addition, a condominium association must 
use the General Property Form to purchase 
coverage on a residential condominium 
building not eligible for the RCBAP or 
when the building is located 
Emergency Program community. 
in an 
2. Cooperative Associations 
Because cooperatives are not in the 
condominium form of ownership, they 
cannot be insured under the RCBAP. 
Residential or nonresidential cooperative 
buildings must be insured by the association 
or corporation under the General Property 
Form. A unit owner in a cooperative 
building does not receive a real estate 
interest in a unit, but rather a share of stock 
in a corporation with the right to occupy a 
particular unit. The entity that owns the 
cooperative building, not the various unit 
members, is the named insured. 
Cooperative buildings where at least 75 
percent of the area of the building is used for 
residential purposes are considered 
residential occupancies under the NFIP. 
Such residential building owners can insure 
the building under the General Property 
Form for a maximum building coverage 
limit of $250,000 in a Regular Program 
community. 
3. Timeshares 
Timeshare buildings basically fall into two 
categories: those where a real estate 
ownership interest has been conveyed, and 
those where just the right to the use of a unit 
has been conveyed. 
Timeshare buildings in the condominium 
form of ownership (fee or real estate) are 
eligible for coverage under the RCBAP. 
These buildings are subject to the same 
eligibility, rating, and coverage requirements 
as other condominiums, including the 
requirement that 75 percent of the area of 
the building be used for residential purposes. 
Timeshare buildings not in the 
condominium form of ownership (right-touse) where at least 75 percent of the area of 
the building is used for residential purposes 
are considered residential occupancies under 
the NFIP. They can be insured by the owner 
of the building under the General Property 
Form for a maximum building coverage 
amount of $250,000 in a Regular Program 
community. 
4. Homeowners Associations 
Individually titled town homes and single-
family buildings, whose owners belong to a 
non-condominium homeowners association, 
can be insured by the individual owners 
under the Dwelling Form and not by the 
homeowners association. The homeowners 
association may purchase coverage for a 
Section D. Condos, Coops, Timeshares 50 

building it may own, such as a clubhouse, 
under the General Property Form. 
5. Secondary Market 
In their selling guides for purchase of 
mortgages on condominium units, Fannie 
Mae and Freddie Mac specifically address 
the requirement of property coverage. These 
Government-Sponsored Enterprises recognize 
flood coverage carried by the association as 
complying with the mandatory purchase 
requirements. 
a. Fannie Mae 
Fannie Mae, which purchases loans on the 
secondary market that are secured by 
condominiums located in high-flood-risk 
areas, may have specific requirements. As of 
this printing, Fannie Mae will accept 
building coverage provided under a 
Dwelling Form policy to supplement 
inadequate coverage carried by an 
association. If a condominium association 
declines to carry any flood insurance 
coverage, then each unit owner may 
purchase an individual policy to comply 
with Fannie Maes requirements. 
As of this printing, Fannie Mae accepts 
flood insurance deductibles up to the 
maximum deductible available under the 
NFIP, which for residential condominium 
buildings is $25,000. The Selling and 
Servicing Guides and Announcements may 
be accessed through the website at 
http://www.efanniemae.com. Lenders who 
have additional questions regarding flood 
insurance requirements may contact their 
Fannie Mae Customer Account Manager, 
Servicing Consultant, or Portfolio Manager. 
b. Freddie Mac 
As of this printing, Freddie Mac 
requirements specify the following. 
For condominium units (other than detached 
unit projects) in which all or part of the 
building is in an SFHA, the association must 
maintain building coverage on the building 
for at least the lower of: 
 The buildings replacement cost; or 
 $250,000 multiplied by the number of 
residential units in the building. 
The association must maintain contents 
coverage on the building for the lower of: 
 The actual cash value of the contents in 
the building that are owned in common 
by the association members; or 
 The maximum amount of contents 
coverage sold by the NFIP for a 
condominium building. 
If the association does not maintain the 
required coverage, then the unit owner must 
maintain building coverage on the unit in an 
amount at least equal to the amount required 
on a one- to four-unit property. 
Freddie Mac states that the deductible of the 
condominium associations coverage may 
not exceed the maximum deductible amount 
currently allowed under the NFIP for 
condominium association building coverage. 
The deductible for association building 
contents may not exceed the maximum 
deductible amount currently allowed under 
the NFIP for association building contents. 
See Chapter 58 of the Freddie Mac Single 
Family Seller/Servicer Guide at 
http://www.allregs.com/fhlmc. 
51 Section D. Condos, Coops, Timeshares 

SECTION E 
IMPLEMENTATION OF KEY PROVISIONS 
The preceding sections of these guidelines 
discuss specific provisions of the National 
Flood Insurance Reform Act of 1994 and 
regulations as they apply to an individual 
borrower or policyholder. This section 
describes how certain key provisions of the 
1994 Reform Act are to be implemented 
within the lending industry. 
1. Tripwires 
a. Loan Activity 
The making, increasing, extending, or 
renewing of a loan is a tripwire for 
compliance with the mandatory flood 
insurance purchase requirements. This 
tripwire occurs most frequently upon loan 
origination, e.g., when a lender knows or has 
reason to know whether the mandatory 
purchase requirements apply. Another 
tripwire occurs in any situation that alerts a 
lender or servicer to a change in 
circumstances, e.g., a known map change, or 
the receipt of a notice to pay the premium to 
avoid policy expiration. 
If a borrower executes a note on improved 
real estate as collateral for a personal loan, 
and the lender does not perfect a security 
interest or mortgage in the building itself, 
the loan is not a designated loan and, 
therefore, is not subject to the mandatory 
purchase requirement. 
b. Loan Transfer or Purchase 
The transfer or purchase of a loan among 
regulated lenders or servicers does not 
constitute the making of a loan, so it does 
not trigger the mandatory purchase 
requirement. 
It is the lending regulators position that 
deeming a loan purchase as a regulatory 
tripwire could result in the imposition of 
duplicative and potentially inconsistent 
requirements on the seller and purchaser of 
loans sold in the secondary market. As a 
condition of purchase, a loan purchaser may 
require the seller to determine whether the 
building securing the loan is in a high flood 
risk area, also known as a Special Flood 
Hazard Area (SFHA). The practice of 
requiring a seller to make a representation as 
to compliance with the mandatory purchase 
requirements also provides additional 
protection to a loan purchaser. This 
representation is particularly important when 
the loans are in communities that have 
SFHAs. 
However, the Government-Sponsored Enterprises (GSEs) do require flood insurance 
coverage on any loan located in an SFHA 
and transferred to or purchased by them. 
Both Fannie Mae and Freddie Mac require 
their respective sellers and servicers to be in 
full compliance with the flood insurance 
statutes. Fannie Maes flood insurance 
requirements can be viewed in the Single-
Family Selling and Servicing Guides and 
Lender Announcements available through 
their website at http://www.efanniemae.com. 
Freddie Mac has similar requirements for 
lenders in Chapter 58 of the Single-Family 
Seller/Servicer Guide at 
http://www.allregs.com/fhlmc. 
Freddie Mac considers its purchase of a loan 
as a tripwire, while Fannie Maes guide 
requires compliance with the mandatory 
purchase requirements at the time of loan 
origination. Consequently, an originator or 
intermediate holder of a loan will be 
constrained in passing on a loan that does 
not meet the criteria of the GSE sales 
guides. An entity not directly covered by the 
statutory requirements, such as a mortgage 
banker, will be indirectly required to satisfy 
the statutory flood insurance requirements if 
it or any subsequent party attempts to sell 
mortgage loans to Fannie Mae or Freddie 
Mac. An unregulated mortgage bank that 
53 Section E. Implementation 

TRIPWIRES DURING LIFE OF LOAN 
Section E. Implementation 54 

extends a designated loan without flood 
insurance will be unable to pass that loan on 
to the GSE market. 
In addition, although a conventional loan 
may be extended in a community that does 
not participate in the National Flood 
Insurance Program (NFIP), a lender may 
find that it cannot pass the loan on to Fannie 
Mae or Freddie Mac. The GSEs have 
restated they will not buy mortgages secured 
by properties in nonparticipating communities if they are located in an SFHA. 
However, they will accept loans in nonparticipating communities that have not 
been mapped. The quality control measures 
instituted by the GSEs set the standard for 
the industry, even for transactions to private 
investors who are outside the GSE market. 
When any loan is sold and servicing is 
transferred to the new servicer, notice of the 
identity of the new servicer must be 
provided to the Federal Emergency Management Agencys (FEMA) designee, which is 
the insurance company listed on the policy. 
c. Portfolio Review 
A look-back or retroactive loan portfolio 
review, as well as a review made on a 
prospective basis, which may disclose 
uninsured risks, is encouraged but not 
required by the law. The statutory requirements 
contain no express or implied language that 
obligates a regulated lender to review its 
portfolio of existing loans. Under GSE 
criteria, a lender or servicer is required to 
monitor loans sold to the GSE. 
The 1994 Reform Act requires lenders and 
servicers to develop policies and procedures 
to ensure that flood insurance coverage is 
obtained before a loan can be granted, when 
a determination has been made that a 
building securing a loan is located in an 
SFHA. The lender or servicer also must 
ensure that a policy does not lapse after it 
has been placed at loan origination. If the 
policy lapses and the borrower refuses to 
purchase flood insurance within 45 days of 
the required notice, the lender must force 
place coverage. 
A mortgagee or servicer must require the 
purchase of flood insurance at any time 
during the term of the loan when the lender 
determines that the building or manufactured (mobile) home is located in an SFHA. 
This position is intended to ensure that 
buildings located in SFHAs are covered by 
flood insurance, regardless of whether the 
area is designated as an SFHA by the 
Administrator of FEMA before or after the 
loan is originated. For example, when a 
community or area is remapped by FEMA, 
buildings that were not located in an SFHA 
at the time the mortgage was made may later 
be identified to be in an SFHA. 
A lender is notified of remapping through 
publication in the Federal Register of map 
change information pertaining to an 
individual community, or through a compendium that lists all changes during a 
specific time period. FEMA offers a 
subscription service (for a fee) that provides 
information on map changes. FEMA also 
makes map change information available 
online at http://msc.fema.gov. Some flood 
zone determination companies provide the 
service of monitoring map changes that 
influence the status of loans. 
Apart from the requirements mandated on 
origination of a loan, a regulated lender need 
only review and take action on any part of 
its existing portfolio, i.e., look forward, 
for safety and soundness purposes, or if it 
knows or has reason to know of the need for 
NFIP coverage. However, scheduled periodic reviews that track the need for flood 
insurance on loan portfolios are encouraged. 
The 1994 Reform Act does require lenders 
to check the status of security property for 
loans when triggered by the statutory 
tripwires. However, the Reform Act did not 
add remappings to the list of statutory 
tripwires. Neither the Reform Act nor the 
agencies regulations require lenders to 
monitor for map changes. 
55 Section E. Implementation 

The GSE sales guides go beyond the 
statutory requirements by directing lenders 
to continually monitor map changes and 
changes in community status under the 
NFIP. 
2. Safety and Soundness 
Federal lending regulators view adequate 
flood insurance coverage as an important 
factor in measuring the safety and soundness 
of a lending institution that extends loans in 
SFHAs. The existence of flood insurance is 
a component of prudent underwriting and 
protects the lenders ongoing interest in its 
collateral. Each lender must tailor its flood 
insurance risk management procedures to 
suit its particular circumstances. The Federal 
regulators encourage lenders to evaluate and 
modify their flood insurance programs as 
needed to comport with both the mandatory 
purchase requirements and the principles of 
safe and sound banking that may be unique 
to a particular lender. 
A lenders flood insurance needs vary 
widely depending on lending concentrations 
within the geographic areas it serves. For 
example, a high prevalence of loans in an 
SFHA requires particular vigilance. Institutions that are significantly exposed to the 
risks for which flood insurance is designed 
to compensate should determine the 
adequacy of flood insurance coverage by 
conducting periodic reviews, or reviews 
triggered by remapping of areas represented 
in their loan portfolio. Accordingly, a map 
change in a community that contains a 
significant number of loans in an SFHA 
merits a heightened analysis. The same 
principle applies to a regulated lenders 
purchase or transfer of existing loans in a 
community containing a special flood 
hazard. 
In non-participating communities, lenders 
should have procedures in place to ensure 
that loans on properties in SFHAs where 
flood insurance is not available do not 
constitute a large portion of the institutions 
loan portfolio. 
Section E. Implementation 56 
3. Table Funding 
The regulations generally follow the Real 
Estate Settlement Procedures Act definition 
in which table funding is defined as a 
settlement at which a loan is funded by a 
contemporaneous advance of loan funds and 
an assignment of the loan to the person 
advancing the funds. The typical table-
funded transaction should be considered a 
loan made, rather than purchased, by the 
entity that actually supplies the funds, and 
thus is subject to the mandatory purchase 
requirements. 
Table funding is a mechanism used in the 
wholesale mortgage lending industry for 
utilizing mortgage brokers in the production 
of mortgage loans. The brokers who 
originate the loans are independent 
contractors not subject to Federal regulatory 
supervision. 
In the typical table funding situation, the 
party providing the funding reviews and 
approves the credit standing of the borrower 
and issues a commitment to the broker or 
dealer to purchase the loan at the time the 
loan is originated. Frequently, all loan 
documentation and other statutorily mandated 
notices are supplied by the party providing 
the funding, rather than the broker or dealer. 
The funding party provides the original 
funding at the table when the broker or 
dealer and the borrower close the loan. Concurrent with the loan closing, the funding 
party acquires the loan from the broker or 
dealer. Wholesale lenders provide the funds 
for loan closings and acquire the resulting 
loans, which they sell into the secondary 
market. Mortgage brokers receive compensation for surrendering the servicing income 
stream. 
Under the regulations, lenders who provide 
table funding to close loans originated by 
mortgage brokers or manufactured (mobile) 
home dealers, such as described above, are 
deemed to be making, not purchasing, loans 
for purposes of the mandatory flood 
insurance requirements. Consequently, mort- 
gage brokers are not obligated to comply 

with the 1994 Reform Act in these types of 
transactions. However, if any mortgage 
brokers are involved in the processing and 
underwriting of the application, the lender 
should contractually delegate to them the 
responsibility to comply with the various 
notice, form, and purchase requirements of 
the Flood Disaster Protection Act of 1973, 
thereby eliminating any duplication of flood 
determinations and borrower notices. 
4. Impact on Servicers 
The 1994 Reform Act addresses the role of 
servicers by sanctioning NFIP-related 
activities conducted on behalf of regulated 
lenders. 
A servicer, as broadly defined in the 1994 
Reform Act (42 U.S.C. 4003(a)(11) and 
4121(a)(11)) may be a regulated lender or a 
private entity assisting a lender as an 
independent contractor. The provisions of 
the 1994 Reform Act apply to all banking 
institutions subsidiaries and service 
corporations. If a servicer is a subsidiary of 
a regulated lender, it is included under the 
purview of the 1994 Reform Act. As 
discussed in Section C of these guidelines, 
the activities that apply to servicers include 
escrow, force placement, and zone 
determination, as well as the submission and 
receipt of notices. A servicer is directly 
involved in NFIP activities as a recipient of 
notices such as a copy of the borrowers 
Notice of Special Flood Hazard and 
Availability of Federal Disaster Relief 
Assistance from the lender and the 
expiration/renewal notice from the insurer. 
The regulations that address a servicers 
activities treat loan servicers as acting on 
behalf of regulated lending institutions. 
Under the regulations, loan servicers are to 
be held answerable for their actions to the 
lender by means of contract. A lender thus 
may fulfill its duties under the 1994 Reform 
Act by imposing its responsibilities on the 
servicer under a loan service agreement. 
Accordingly, lenders should include in their 
loan servicing agreements language ensuring 
that the servicer will fulfill Federal 
insurance requirements for escrow, force 
placement, flood hazard determinations, and 
the various notices, with conditions for 
recourse. The Federal regulations state that 
where deficiencies are found in existing loan 
servicing contracts, lenders should revise 
these agreements to provide for the loan 
servicer to fulfill Federal flood insurance 
requirements. It would also be prudent to 
monitor the activity of servicing agents. 
The mandatory purchase provisions do not 
apply directly to loan originators that are not 
banking institutions or to servicers that are 
not acting on behalf of a banking institution. 
However, these non-bank originators and 
servicers must see to it that loans they sell or 
service for a GSE meet the requirements of 
the 1994 Reform Act. Non-bank (e.g., 
mortgage broker), nonconforming loan 
lenders who do not originate for GSEs do 
not come under the authority of the 1994 
Reform Act. 
5. Private Flood Insurance 
As part of the notification procedure in 
making a loan, lenders must inform 
prospective borrowers of the availability of 
coverage from private insurers as well as 
from the NFIP. Federal regulatory entities 
may require gap/blanket insurance, which is 
not available from the NFIP, through a 
private insurer. However, FEMA recognizes 
the limited availability of flood insurance 
from the private insurance market. 
A lender must consider the suitability of 
private flood insurance policies only when 
the mandatory purchase requirement applies. 
If NFIP coverage is not available in a 
particular community, or if the risk is 
otherwise not eligible for NFIP coverage, 
e.g., in a non-participating community or a 
Coastal Barrier Resources Act area, private 
flood insurance may be an alternative. A 
lender has more discretion in selecting 
private flood coverage when NFIP coverage 
is not available. 
57 Section E. Implementation 

When private flood coverage is being 
considered in lieu of an NFIP policy, a 
lender should understand and comply with 
FEMAs criteria (described below) for 
selection of the private insurer and the form 
of coverage. 
A private flood insurance policy that meets 
all six of the FEMA criteria described in a. 
through f. below conforms to the mandatory 
flood insurance purchase requirements of 
the 1994 Reform Act. To the extent that the 
private policy differs from the NFIP 
Standard Flood Insurance Policy (SFIP), 
available on the FEMA website at 
http://www.fema.gov/business/nfip/sfip.shtm, 
the differences should be carefully examined 
before the policy is accepted as sufficient 
protection under the law. 
a. Licensure 
The insurer must be licensed, admitted, or 
otherwise approved to do business in the 
jurisdiction where the building is located, by 
the insurance regulator of that jurisdiction, 
except as indicated in b. below. 
b. Surplus Lines Recognition 
(Non-Residential Commercial) 
In the case of non-residential commercial 
property insurance issued under a policy of 
difference in conditions, multiple peril, all 
risk, or other blanket coverage, the insurer 
should be recognized, or not disapproved, as 
a surplus lines insurer by the insurance 
regulator of the jurisdiction where the 
building is located. 
c. Requirement of 45-Day Cancellation/ 
Non-Renewal Notice 
The private flood insurance policy should 
include a requirement for the insurer to give 
45 days written notice of cancellation or 
non-renewal to the insured with respect to 
the flood insurance coverage. The policy 
should also state that, to be effective, such 
notice must be mailed to both the insured 
and the lender or Federal agency lender, and 
must include information about the avail
ability of flood insurance coverage under the 
NFIP. The policy should be as restrictive in 
its cancellation provisions as the SFIP. 
d. Breadth of Policy Coverage 
The policy must guarantee that the flood 
insurance coverage, considering deductibles, 
exclusions, and conditions offered by the 
insurer, is at least as broad as the coverage 
under the SFIP. 
e. Strength of Mortgage Interest Clause 
Lenders must ensure that a mortgage interest 
clause similar to that contained in the 
General Conditions section of the SFIP is 
contained in the policy. 
f. Legal Recourse 
The policy must contain a provision that the 
insured must file suit within 1 year after the 
date of written denial of all or part of the 
claim. 
6. Regulatory Overview 
The 1994 Reform Act expressly 
incorporates regulatory sanctions into the 
law and indirectly influences the potential 
for civil liability. This subsection addresses 
the regulatory examinations and penalties; 
the issue of liability under civil law is 
discussed on page 60. 
a. Regulatory Examinations 
As part of the 1994 Reform Act, Congress 
established a task force charged with 
studying the extent to which the Federal 
regulatory agencies and the secondary 
market enforce the statutory requirements. 
Accordingly, lenders and servicers can 
continue to expect onsite examination by the 
regulatory entity primarily responsible for 
the supervision of the institution as part of 
their compliance examinations. Similarly, 
the GSEs will be reviewed by their oversight 
agency and must conduct a review of their 
sellers. The examination procedures may 
include reviewing a sampling of loan files. 
Section E. Implementation 58 

The examiners may perform the following 
activities: 
 Review an institutions practices dealing 
with flood insurance, including a 
suitable flood zone determination 
procedure that includes monitoring 
renewal of coverage and maintaining 
records of compliance. 
 Ask for proof of the submission of the 
Notice to Borrower form. 
 Observe whether the timing requirements of the various notices have been 
met. 
 Verify that the proper amount of 
coverage was placed in effect at the time 
of origination and remains in force 
throughout the renewal periods, with the 
lender shown as the mortgagee or loss 
payee on the policy. 
 Check that the lender follows 
appropriate procedures when an area is 
reclassified because of a flood map 
revision. 
 Confirm that a lender or servicer 
exercises force placement if there is 
failure to escrow or to continue a policy 
in effect. 
The regulatory examinations will be tailored 
to the activities of the institution under 
review. For example, if an institution 
purchases servicing rights, the examination 
probably will include a review of the 
contractual obligations placed on the 
institution by the owner of the loans. 
Similarly, if the institution utilizes a third 
party to service loans, the contract with the 
third party may be reviewed to ascertain that 
the flood insurance requirements are 
identified and the compliance responsibilities are adequately addressed. If the 
institution transfers servicing of loans to 
another servicer, the institution must show 
that it provided notice of the new servicers 
identity to the FEMA designee within the 
prescribed timeframe. 
If the institution uses a third party to 
perform flood zone determinations, it can 
expect a review of its contractual provisions 
to verify that compliance requirements are 
identified and covered, including the extent 
of the third partys guarantee of work. 
b. Regulatory Penalties 
Under the 1994 Reform Act, Congress for 
the first time directed the agencies to impose 
civil money penalties for noncompliance 
with the mandatory purchase requirements. 
The law requires penalties related to covered 
loans on which a lender fails to: 
 Place insurance, 
 Escrow flood insurance premium on 
applicable loans, 
 Provide notice requirements pertaining 
to designated loans, or 
 Force place the insurance 
in such a way that constitutes a pattern or 
practice of committing violations giving 
rise to an assessable event (42 U.S.C. 
4012a(f) and (g)). Similar provisions exist 
with respect to GSEs. 
The per-violation and aggregate amounts of 
civil penalties are adjusted by statute for 
inflation on a periodic basis. In accordance 
with the Federal Civil Penalties Inflation 
Adjustment Act of 1990 (28 U.S.C. 2461 
note), Federal agencies must evaluate and 
adjust the penalty amount at least once every 
4 years. Lenders can check with their 
regulators for the most current penalty 
amount. 
Penalties assessed are deposited in the 
National Flood Mitigation Fund created by 
the 1994 Reform Act. As of November 30, 
2006, a total of 119 banks had been assessed 
59 Section E. Implementation 

nearly $1.3 million in penalties, for various 
violations of the 1994 Reform Act. 
Other remedial sanctions consist of 
unsatisfactory bank ratings, memoranda of 
understanding, and, ultimately, cease and 
desist orders being issued against lending 
institutions found to have a pattern or 
practice of committing violations. 
7. Civil Liability 
In legal actions where aggrieved borrowers 
have instituted actions against lenders for 
failure to obtain flood insurance coverage, 
the courts have stated that the mandatory 
purchase and notice statutes are designed for 
regulatory purposes to strengthen the NFIP. 
The court rulings have concluded that the 
statute and lender regulations are not 
intended to make incidental beneficiaries 
of aggrieved borrowers who find themselves 
without NFIP coverage on flood-damaged 
structures located in an SFHA. In the past, 
the courts have ruled that the mandatory 
purchase statute does not grant borrowers 
any implied private cause of action that 
might enable them to automatically recover 
funds on the basis of a lenders failure to 
comply with the Flood Disaster Protection 
Act of 1973. Courts have agreed with the 
lenders that the intent of the law is to 
promote sound land use management and 
lessen the payments made from the Federal 
Treasury for disaster assistance, as well as to 
protect the lenders themselves. 
Section E. Implementation 60 

LEGAL REFERENCES
This appendix references and describes the legal citations of the mandatory purchase sections 
of the National Flood Insurance Act of 1968, as amended. The statutory history and authority 
of various aspects of the Act that pertain to the mandatory purchase provisions are covered. 
Administration of the National Flood Insurance Program 
The National Flood Insurance Program (NFIP) is administered by the Federal Emergency 
Management Agency (FEMA), a component of the U.S. Department of Homeland Security 
(DHS). 
At its inception, however, the NFIP was administered by the Federal Insurance 
Administration (FIA), which was established under the Housing and Urban Development Act 
of 1968, as part of the U.S. Department of Housing and Urban Development (HUD). The FIA 
was headed by the Federal Insurance Administrator, an office authorized by the Urban 
Property Protection and Reinsurance Act of 1968 (Title XI of the Housing and Urban 
Development Act of 1968). President Carters Reorganization Plan No. 3 of 1978 (43 FR 
41493) created FEMA and transferred the functions authorized and described in the National 
Flood Insurance Act of 1968 and the position of Federal Insurance Administrator to FEMA. 
The organization of FEMA was further defined in Executive Order 12127, dated March 31, 
1979 (44 FR 19367), and Executive Order 12148, dated June 20, 1979. On April 1, 1979, in a 
notice published in 44 FR 20962, and later codified at 44 CFR 2.64, the Director of FEMA 
delegated responsibility for the administration of the NFIP to the Federal Insurance 
Administrator of the FIA, which had become a Directorate within FEMA. 
When the DHS was established on March 1, 2003, FEMA was among the 22 Federal agencies 
transferred to the new Cabinet-level department. Since the advent of the DHS, FEMA 
Mitigation has been responsible for administration of the NFIP. The Director of FEMA is 
now the Administrator of FEMA. The Assistant Administrator of FEMA Mitigation also 
serves as Federal Insurance Administrator. 
The authorization of the NFIP is codified in the United States Code at 42 U.S.C. 4011. 
Operation of the National Flood Insurance Program 
The National Flood Insurance Act of 1968, which created the NFIP, is codified at 42 U.S.C. 
4001 et seq. The Act became effective on January 28, 1969, authorized by the National Flood 
Insurance Act of 1968 (Title XIII of the Housing and Urban Development Act of 1968, as 
amended, Public Law 90-448, 82 Stat 476). The NFIP was established as a federally 
subsidized insurance program to provide flood insurance at or below actuarial rates. The 
legislative history states that Congress created the NFIP because flood insurance was 
generally unavailable from private insurance companies, who were unable to write flood 
insurance on an economically feasible basis (H. Rep. No. 90-1585, 90th Cong., 2d Sess., 
reprinted in, 1968 U.S. Code Cong. & Ad. News 2873, 2965-73; S. Rep. No. 90-1123, 90th 
Cong., 2d Sess. (1968)). 
Initially, the NFIPs Standard Flood Insurance Policy (SFIP) was available only from 
independent insurance agents writing directly for FEMA. In October 1983, FEMA instituted 
1-1 Appendix 1. Legal References 

the Write Your Own (WYO) Program, whereby qualified property and casualty insurance 
companies are authorized to write and service the federally backed SFIP under their own 
names (62 CFR Sub-Part C, 62.23). With the WYO Program, FEMA functions similarly to a 
reinsurer in accepting the risk of the primary WYO insurer on the line of NFIP business 
written by the companies. FEMA continues to bear the risk for the direct insurance program 
while serving as a guarantor of WYO insurers on WYO business. 
Unlike the private insurance industry, the NFIP is by statute primarily a take all comers 
insurance entity. (See pages 20-22 of these guidelines for exceptions) No individual risk 
analysis, i.e., underwriting, is conducted to determine the likelihood of a future loss to a 
specific property. The main criterion for insurability is whether or not the community in 
which the property is located participates in the NFIP (42 U.S.C. 4012). If so, the risk is then 
rated in accordance with its flood zone, date of construction, building type, and amount of 
coverage requested. Premiums paid are deposited by the Administrator of FEMA to the 
National Flood Insurance Fund (42 U.S.C. 4017(b)(2)), which may be augmented when 
necessary by funds borrowed from the United States Treasury and by appropriations (42 
U.S.C. 4016, 4017(b)(1),(3)). 
The insurance regulations set out the terms and conditions of flood insurance coverage and 
rates. All flood insurance made available under the NFIP is subject to the express terms and 
conditions of the insurance policy, the statute, and the governing regulations (44 C.F.R. 
61.4(a)). 
As set forth at 44 C.F.R. 61, Appendix A(1), the SFIP is a single-peril policy that covers only 
direct physical loss by or from flood and limits coverage under both the insuring clause and 
the exclusions. The regulations prohibit alteration, variation, or waiver of the policy 
provisions (44 C.F.R. 61.13(d)), except by the Federal Insurance Administrator, who is 
charged with interpreting the meaning of the policy (44 C.F.R. 61.14(b)). 
Other statutory references to the Act and its relevant amendments include the National Flood 
Insurance Act of 1968 (title 13 of the Housing and Urban Development Act of 1968), Pub. L. 
No. 90-448, 82 Stat. 476(1968) (codified at 42 U.S.C. 4001-4128); the Housing and Urban 
Development Act of 1969, Pub. L. No. 91-152, 83 Stat. 397 (1969) (codified at 12 U.S.C. 
section 1703); and the Flood Disaster Protection Act of 1973, Pub. L. No. 93-234, 87 Stat. 
975 (1973). The 1994 amendments were accomplished as part of the Riegle Community 
Development and Regulatory Improvement Act of 1994, Pub.L. 103-325, Title V, 108 Stat. 
2257-2260 et.seq., generally referred to as the Reform Act. The Flood Insurance Reform Act 
of 2004, Pub. L. No. 108-264 (codified at 42 U.S.C. 4030), focused on severe repetitive loss 
properties and miscellaneous topics that did not affect the requirement to purchase flood 
insurance. 
Mandatory Purchase Requirement 
The mandatory purchase requirement was established by the Flood Disaster Protection Act of 
1973. This law required purchase of flood insurance as a condition for obtaining a mortgage 
loan from federally regulated lending institutions for properties in identified floodprone areas, 
and as a condition for obtaining Federal assistance. The restriction on Federal assistance 
included the receipt of federally related financing by private lending institutions as well as 
VA and FHA loans. Since flood insurance was available only in communities participating in 
Appendix 1. Legal References 1-2 

the NFIP, the result of this legislation was a great increase in the number of communities 
participating in the program and in the number of policies in force. 
The 1973 mandatory purchase requirement, however, was met with some criticism. 
Continuing pressure from contractors and real estate developers resisting the limits on lending 
and Federal assistance to non-participating communities resulted in a 1977 amendment that 
modified 4106 (b) by deleting the original wording, which prohibited private regulated 
lending in non-participating communities, and in its place substituted a notice requirement. 
This 1977 change came to be known as the Eagleton Amendment (Pub.L 95-128, Title VII, 
sec. 703(a), Oct 12, 1977). The amendment deleted from the 1973 Act its 4106 (b) 
requirement that Federal regulators issue regulations prohibiting lenders from making 
conventional loans with respect to property in non-participating communities. The notice 
requirement is contained in the Notice of Special Flood Hazard and Availability of Federal 
Disaster Relief Assistance. Consequently, lenders regulated by, or whose deposits are insured 
by, Federal instrumentalities may now make conventional loans secured by mortgages on 
improved real property and manufactured (mobile) homes in areas of special flood hazard in 
communities that do not participate in the NFIP. They may do so notwithstanding the fact that 
such property is not eligible for the purchase of National Flood Insurance. Thus, the 
mandatory flood insurance purchase requirement does not apply with respect to such loans. 
However, lenders should carefully evaluate the underwriting risk involved in making such 
loans. In non-participating communities, a lender may require private flood insurance, if 
available. The notice requirements do not apply to unsecured loans, or to loans secured by 
improved real property that is not located in an SFHA. 
The 1977 change benefits developers, who are allowed to obtain federally guaranteed money 
for floodplain development, but works to the detriment of the ultimate, and perhaps 
unsuspecting, future owner of the building at the time a flood may occur. The possibility of 
flood damage is in addition to what could be an excessively high premium in the future, if the 
building is constructed below the Base Flood Elevation and the community subsequently 
joins the NFIP as a participating community. 
The mandatory purchase law directed the Federal lending regulators and Government-
Sponsored Enterprises (GSEs) to adopt regulations requiring lenders subject to their 
jurisdiction to compel borrowers to purchase flood insurance protecting any improved real 
estate or mobile home located in an area of special flood hazard in a community that is 
eligible for the purchase of National Flood Insurance, if the building, mobile home, and any 
personal property securing such loan is to be the security for the loan. 
Each Federal regulatory agency and GSE was given the right to issue its own regulations to 
implement the 1973 Act, and the authority of FEMA was limited to its statutory responsibility 
of administering the NFIP. FEMA was not given direct responsibility for implementing 
enforcement of the mandatory flood insurance purchase requirements. 
1994 Amendments to the Mandatory Purchase Requirement 
The Riegle Community Development and Regulatory Improvement Act, Pub. L. 103-325, 108 
Stat. 2160 (the Reform Act), was signed into law on September 23, 1994. As described in this 
handbook, the new law substantially amended the mandatory purchase requirement. 
The flood insurance provisions of the 1994 Act required the Office of the Comptroller of the 
Currency, the Federal Reserve System, the Federal Deposit Insurance Corporation, the Office 
1-3 Appendix 1. Legal References 

of Thrift Supervision, and the National Credit Union Administration to revise their flood 
insurance regulations. The Farm Credit Administration was required to promulgate flood 
insurance regulations for the first time. The six agencies issued their regulations jointly in 
order to fulfill the statutory requirements and have coordinated and consulted with the Federal 
Financial Institutions Examination Council, as required by certain of the Reform Act flood 
insurance provisions. The CFR citations for the regulations of the lender agencies are listed 
below. Contact information for the agencies is provided in Appendix 5. 
Office of the Comptroller of the Currency: 12 CFR Part 22 
Federal Reserve System: 12 CFR Part 208 
Federal Deposit Insurance Corporation: 12 CFR Part 339 
Office of Thrift Supervision: 12 CFR Parts 563 and 572 
Farm Credit Administration: 12 CFR Part 614 
National Credit Union Administration: 12 CFR Part 760 
Appendix 1. Legal References 1-4 

FDIC REGULATIONS 
Federal Deposit Insurance Corporation 
12 CFR Chapter III 
Authority and Issuance 
For the reasons set forth in the joint preamble, the Board of Directors of the FDIC revises part 
339 of chapter III of title 12 of the Code of Federal Regulations to read as follows: 
PART 339--LOANS IN AREAS HAVING SPECIAL FLOOD HAZARDS 
339.1 Authority, purpose, and scope. 
339.2 Definitions. 
339.3 Requirement to purchase flood insurance where available. 
339.4 Exemptions. 
339.5 Escrow requirement. 
339.6 Required use of standard flood hazard determination form. 
339.7 Forced placement of flood insurance. 
339.8 Determination fees. 
339.9 Notice of special flood hazards and availability of Federal disaster relief assistance. 
339.10 Notice of servicers identity. 
Appendix A to Part 339--Sample Form of Notice of Special Flood Hazards and Availability 
of 
Federal Disaster Relief Assistance 
Authority: 42 U.S.C. 4012a, 4104a, 4104b, 4106, and 4128. 
Sec. 339.1 Authority, purpose, and scope. 
(a) Authority. This part is issued pursuant to 42 U.S.C. 4012a, 4104a, 4104b, 4106, and 4128. 
(b) Purpose. The purpose of this part is to implement the requirements of the National Flood 
Insurance Act of 1968 and the Flood Disaster Protection Act of 1973, as amended (42 
U.S.C. 4001-4129). 
(c) Scope. This part, except for Secs. 339.6 and 339.8, applies to loans secured by buildings 
or mobile homes located or to be located in areas determined by the Director of the 
Federal Emergency Management Agency to have special flood hazards. Sections 339.6 
and 339.8 apply to loans secured by buildings or mobile homes, regardless of location. 
Sec. 339.2 Definitions. 
(a) Act means the National Flood Insurance Act of 1968, as amended (42 U.S.C. 4001-4129). 
(b) Bank means an insured state nonmember bank and an insured state branch of a foreign 
bank or any subsidiary of an insured state nonmember bank. 
(c) Building means a walled and roofed structure, other than a gas or liquid storage tank, that 
is principally above ground and affixed to a permanent site, and a walled and roofed 
structure while in the course of construction, alteration, or repair. 
2-1 Appendix 2. FDIC Regulations 

(d) Community means a State or a political subdivision of a State that has zoning and 
building code jurisdiction over a particular area having special flood hazards. 
(e) Designated loan means a loan secured by a building or mobile home that is located or to 
be located in a special flood hazard area in which flood insurance is available under the 
Act. 
(f) Director of FEMA means the Director of the Federal Emergency Management Agency. 
(g) Mobile home means a structure, transportable in one or more sections, that is built on a 
permanent chassis and designed for use with or without a permanent foundation when 
attached to the required utilities. The term mobile home does not include a recreational 
vehicle. For purposes of this part, the term mobile home means a mobile home on a 
permanent foundation. The term mobile home includes a manufactured home as that term 
is used in the NFIP. 
(h) NFIP means the National Flood Insurance Program authorized under the Act. 
(i) Residential improved real estate means real estate upon which a home or other residential 
building is located or to be located. 
(j) Servicer means the person responsible for: 
(1) Receiving any scheduled, periodic payments from a borrower under the terms of a 
loan, including amounts for taxes, insurance premiums and other charges with respect 
to the property securing the loan; and 
(2) Making payments of principal and interest and any other payments from the amounts 
received from the borrower as may be required under the terms of the loan. 
(k) Special flood hazard area means the land in the flood plain within a community having at 
least a one percent chance of flooding in any given year, as designated by the Director of 
FEMA. 
(l) Table funding means a settlement at which a loan is funded by a contemporaneous 
advance of loan funds and an assignment of the loan to the person advancing the funds. 
Sec. 339.3 Requirement to purchase flood insurance where available. 
(a) In general. A bank shall not make, increase, extend, or renew any designated loan unless 
the building or mobile home and any personal property securing the loan is covered by 
flood insurance for the term of the loan. The amount of insurance must be at least equal to 
the lesser of the outstanding principal balance of the designated loan or the maximum 
limit of coverage available for the particular type of property under the Act. Flood 
insurance coverage under the Act is limited to the overall value of the property securing 
the designated loan minus the value of the land on which the property is located. 
(b) Table funded loans. A bank that acquires a loan from a mortgage broker or other entity 
through table funding shall be considered to be making a loan for the purposes of this part. 
Sec. 339.4 Exemptions. 
Appendix 2. FDIC Regulations 2-2 

The flood insurance requirement prescribed by Sec. 339.3 does not apply with respect to: 
(a) Any State-owned property covered under a policy of self-insurance satisfactory to the 
Director of FEMA, who publishes and periodically revises the list of States falling within 
this exemption; or 
(b) Property securing any loan with an original principal balance of $5,000 or less and a 
repayment term of one year or less. 
Sec. 339.5 Escrow requirement. 
If a bank requires the escrow of taxes, insurance premiums, fees, or any other charges for a 
loan secured by residential improved real estate or a mobile home that is made, increased, 
extended, or renewed on or after October 1, 1996, the bank shall also require the escrow of all 
premiums and fees for any flood insurance required under Sec. 339.3. The bank, or a servicer 
acting on behalf of the bank, shall deposit the flood insurance premiums on behalf of the 
borrower in an escrow account. This escrow account will be subject to escrow requirements 
adopted pursuant to section 10 of the Real Estate Settlement Procedures Act of 1974 (12 
U.S.C. 2609) (RESPA), which generally limits the amount that may be maintained in escrow 
accounts for certain types of loans and requires escrow account statements for those accounts, 
only if the loan is otherwise subject to RESPA. Following receipt of a notice from the 
Director of FEMA or other provider of flood insurance that premiums are due, the bank, or a 
servicer acting on behalf of the bank, shall pay the amount owed to the insurance provider 
from the escrow account by the date when such premiums are due. 
Sec. 339.6 Required use of standard flood hazard determination form. 
(a) Use of form. A bank shall use the standard flood hazard determination form developed by 
the Director of FEMA (as set forth in Appendix A of 44 CFR part 65) when determining 
whether the building or mobile home offered as collateral security for a loan is or will be 
located in a special flood hazard area in which flood insurance is available under the Act. 
The standard flood hazard determination form may be used in a printed, computerized, or 
electronic manner. 
(b) Retention of form. A bank shall retain a copy of the completed standard flood hazard 
determination form, in either hard copy or electronic form, for the period of time the bank 
owns the loan. 
Sec. 339.7 Forced placement of flood insurance. 
If a bank, or a servicer acting on behalf of the bank, determines, at any time during the term of 
a designated loan, that the building or mobile home and any personal property securing the 
designated loan is not covered by flood insurance or is covered by flood insurance in an 
amount less than the amount required under Sec. 339.3, then the bank or its servicer shall 
notify the borrower that the borrower should obtain flood insurance, at the borrowers 
expense, in an amount at least equal to the amount required under Sec. 339.3, for the 
remaining term of the loan. If the borrower fails to obtain flood insurance within 45 days after 
notification, then the bank or its servicer shall purchase insurance on the borrowers behalf. 
The bank or its servicer may charge the borrower for the cost of premiums and fees incurred 
in purchasing the insurance. 
2-3 Appendix 2. FDIC Regulations 

Sec. 339.8 Determination fees. 
(a) General. Notwithstanding any Federal or State law other than the Flood Disaster 
Protection Act of 1973, as amended (42 U.S.C. 4001-4129), any bank, or a servicer acting 
on behalf of the bank, may charge a reasonable fee for determining whether the building 
or mobile home securing the loan is located or will be located in a special flood hazard 
area. A determination fee may also include, but is not limited to, a fee for life-of-loan 
monitoring. 
(b) Borrower fee. The determination fee authorized by paragraph (a) of this section may be 
charged to the borrower if the determination: 
(1) Is made in connection with a making, increasing, extending, or renewing of the loan 
that is initiated by the borrower; 
(2) Reflects the Director of FEMAs revision or updating of floodplain areas or flood-risk 
zones; 
(3) Reflects the Director of FEMAs publication of a notice or compendium that: 
(i) Affects the area in which the building or mobile home securing the loan is located; 
or 
(ii)By determination of the Director of FEMA, may reasonably require a 
determination whether the building or mobile home securing the loan is located in a 
special flood hazard area; or 
(4) Results in the purchase of flood insurance coverage by the lender or its servicer on 
behalf of the borrower under Sec. 339.7. 
(c) Purchaser or transferee fee. The determination fee authorized by paragraph (a) of this 
section may be charged to the purchaser or transferee of a loan in the case of the sale or 
transfer of the loan. 
Sec. 339.9 Notice of special flood hazards and availability of Federal disaster relief 
assistance. 
(a) Notice requirement. When a bank makes, increases, extends, or renews a loan secured by 
a building or a mobile home located or to be located in a special flood hazard area, the 
bank shall mail or deliver a written notice to the borrower and to the servicer in all cases 
whether or not flood insurance is available under the Act for the collateral securing the 
loan. 
(b) Contents of notice. The written notice must include the following information: 
(1) A warning, in a form approved by the Director of FEMA, that the building or the 
mobile home is or will be located in a special flood hazard area; 
(2) A description of the flood insurance purchase requirements set forth in section 102(b) 
of the Flood Disaster Protection Act of 1973, as amended (42 U.S.C. 4012a(b)); 
Appendix 2. FDIC Regulations 2-4 

(3) A statement, where applicable, that flood insurance coverage is available under the 
NFIP and may also be available from private insurers; and 
(4) A statement whether Federal disaster relief assistance may be available in the event of 
damage to the building or mobile home caused by flooding in a Federally-declared 
disaster. 
(c) Timing of notice. The bank shall provide the notice required by paragraph (a) of this 
section to the borrower within a reasonable time before the completion of the transaction, 
and to the servicer as promptly as practicable after the bank provides notice to the 
borrower and in any event no later than the time the bank provides other similar notices to 
the servicer concerning hazard insurance and taxes. Notice to the servicer may be made 
electronically or may take the form of a copy of the notice to the borrower. 
(d) Record of receipt. The bank shall retain a record of the receipt of the notices by the 
borrower and the servicer for the period of time the bank owns the loan. 
(e) Alternate method of notice. Instead of providing the notice to the borrower required by 
paragraph (a) of this section, a bank may obtain satisfactory written assurance from a 
seller or lessor that, within a reasonable time before the completion of the sale or lease 
transaction, the seller or lessor has provided such notice to the purchaser or lessee. The 
bank shall retain a record of the written assurance from the seller or lessor for the period 
of time the bank owns the loan. 
(f) Use of prescribed form of notice. A bank will be considered to be in compliance with the 
requirement for notice to the borrower of this section by providing written notice to the 
borrower containing the language presented in appendix A to this part within a reasonable 
time before the completion of the transaction. The notice presented in appendix A to this 
part satisfies the borrower notice requirements of the Act. 
Sec. 339.10 Notice of servicers identity. 
(a) Notice requirement. When a bank makes, increases, extends, renews, sells, or transfers a 
loan secured by a building or mobile home located or to be located in a special flood 
hazard area, the bank shall notify the Director of FEMA (or the Director of FEMAs 
designee) in writing of the identity of the servicer of the loan. The Director of FEMA has 
designated the insurance provider to receive the banks notice of the servicers identity. 
This notice may be provided electronically if electronic transmission is satisfactory to the 
Director of FEMAs designee. 
(b) Transfer of servicing rights. The bank shall notify the Director of FEMA (or the Director 
of FEMAs designee) of any change in the servicer of a loan described in paragraph (a) of 
this section within 60 days after the effective date of the change. This notice may be 
provided electronically if electronic transmission is satisfactory to the Director of 
FEMAs designee. Upon any change in the servicing of a loan described in paragraph (a) 
of this section, the duty to provide notice under this paragraph (b) shall transfer to the 
transferee servicer. 
2-5 Appendix 2. FDIC Regulations 

STANDARD FLOOD HAZARD DETERMINATION FORM 
FEMA Form 81-93, DEC 05 This form may be locally reproduced. 
3-1 Appendix 3. SFHDF 

Appendix 3. SFHDF 3-2 

3-3 Appendix 3. SFHDF 

NOTICE REQUIREMENTS OF THE STATUTE
Section 4104a Notice requirements (This section of the U.S. Code includes public law 
section 527 of the 1994 Reform Act) 
(a) Notification of Special Flood Hazards 
(1) Regulated lending institutions 
Each Federal entity for lending regulation (after consultation and coordination with the 
Financial Institutions Examination Council) shall by regulation require regulated lending 
institutions, as a condition of making, increasing, extending, or renewing any loan secured by 
improved real estate or a mobile home that the regulated lending institution determines is 
located or is to be located in an area that has been identified by the Director under this title or 
the Flood Disaster Protection Act of 1973 as an area having special flood hazards, to notify 
the purchaser or lessee (or obtain satisfactory assurances that the seller or lessor has notified 
the purchaser or lessee) and the servicer of the loan of such special flood hazards, in writing, a 
reasonable period in advance of the signing of the purchase agreement, lease, or other 
documents involved in the transaction. The regulations shall also require that the regulated 
lending institution retain a record of the receipt of the notices by the purchaser or lessee and 
the servicer. 
(2) omitted 
(3) Contents of notice 
Written notification required under this subsection shall include- 
(A)a warning, in a form to be established by the Director, stating that the building on 
the improved real estate securing the loan is located, or the mobile home securing 
the loan is or is to be located, in an area having special flood hazards; 
(B) a description of the flood insurance purchase requirements under section 102(b) 
of the Flood Disaster Protection Act of 1973 [42 U.S.C.A.  4012a (b)]; 
(C) a statement that flood insurance coverage may be purchased under the national 
flood insurance program and is also available from private insurers; and 
(D)any other information that the Director considers necessary to carry out the 
purposes of the national flood insurance program. 
(b) Notification of Change of Servicer 
(1) Lending institutions 
Each Federal entity for lending regulation (after consultation and coordination with the 
Financial Institutions Examination Council) shall by regulation require regulated lending 
institutions, in connection with the making, increasing, extending, renewing, selling, or 
transferring any loan described in subsection (a)(1), to notify the Director (or the designee of 
4-1 Appendix 4. Notice Requirements 

the Director) in writing during the term of the loan of the servicer of the loan. Such 
institutions shall also notify the Director (or such designee) of any change in the servicer of 
the loan, not later than 60 days after the effective date of such change. The regulations under 
this subsection shall provide that upon any change in the servicing of a loan, the duty to 
provide notification under this subsection shall transfer to the transferee servicer of the loan. 
(2) omitted 
(c) Notification of Expiration of Insurance 
The Director (or the designee of the Director) shall, not less than 45 days before the 
expiration of any contract for flood insurance under this title, issue notice of such expiration 
by first class mail to the owner of the property covered by the contract, the servicer of any 
loan secured by the property covered by the contract, and (if known to the Director) the owner 
of the loan. 
Section 4104b Standard hazard determination forms (This section of the U.S. Code 
includes public law section 528 of the 1994 Reform Act) 
(a) Development 
The Director, in consultation with representatives of the mortgage and lending industry, the 
Federal entities for lending regulation, the Federal agency lenders, and any other appropriate 
individuals, shall develop a standard form for determining, in the case of a loan secured by 
improved real estate or a mobile home, whether the building or mobile home is located in an 
area identified by the Director as an area having special flood hazards and in which flood 
insurance under this title is available. The form shall be established by regulations issued not 
later than 270 days after the date of enactment of the Riegle Community Development and 
Regulatory Improvement Act of 1994. 
(b) Design and Contents 
(1) Purpose 
The form under subsection (a) shall be designed to facilitate compliance with the flood 
insurance purchase requirements of this title. 
(2) Contents 
The form shall require identification of the type of flood-risk zone in which the building or 
mobile home is located, the complete map and panel numbers for the improved real estate or 
property on which the mobile home is located, the community identification number and 
community participation status (for purposes of the national flood insurance program) of the 
community in which the improved real estate or such property is located, and the date of the 
map used for the determination, with respect to flood hazard information on file with the 
Director. If the building or mobile home is not located in an area having special flood hazards 
the form shall require a statement to such effect and shall indicate the complete map and panel 
numbers of the improved real estate or property on which the mobile home is located. If the 
complete map and panel numbers are not available because the building or mobile home is 
not located in a community that is participating in the national flood insurance program or 
Appendix 4. Notice Requirements 4-2 

because no map exists for the relevant area, the form shall require a statement to such effect. 
The form shall provide for inclusion or attachment of any relevant documents indicating 
revisions or amendments to maps. 
(c) Required Use 
The Federal entities for lending regulation shall by regulation require the use of the form 
under this section by regulated lending institutions. Each Federal agency lender shall by 
regulation provide for the use of the form with respect to any loan made by such Federal 
agency lender. The Federal National Mortgage Association and the Federal Home Loan 
Mortgage Corporation and the Government National Mortgage Association shall require the 
use of the form with respect to any loan purchased by such entities. A lender or other person 
may comply with the requirement under this subsection by using the form in a printed, 
computerized, or electronic manner. 
(d) Guarantees Regarding Information 
In providing information regarding special flood hazards on the form developed under this 
section, any lender (or other person required to use the form) who makes, increases, extends, 
or renews a loan secured by improved real estate or a mobile home may provide for the 
acquisition or determination of such information to be made by a person other than such 
lender (or other person), only to the extent such person guarantees the accuracy of the 
information. 
(e) Reliance on Previous Determination 
Any person increasing, extending, renewing, or purchasing a loan secured by improved real 
estate or a mobile home may rely on a previous determination of whether the building or 
mobile home is located in an area having special flood hazards (and shall not be liable for any 
error in such previous determination), if the previous determination was made not more than 7 
years before the date of the transaction and the basis for the previous determination has been 
set forth on a form under this section, unless- 
(1) map revisions or updates pursuant to section 4101(f), 1360(f) after such previous 
determination have resulted in the building or mobile home being located in an area 
having special flood hazards; or 
(2) the person contacts the Director to determine when the most recent map revisions or 
updates affecting such property occurred and such revisions and updates have 
occurred after such previous determination. 
(f) Effective Date 
The regulations under this section requiring use of the form established pursuant to this 
section shall be issued together with the regulations required under subsection (a) and shall 
take effect upon the expiration of the 180-day period beginning on such issuance. 
4-3 Appendix 4. Notice Requirements 

Appendix A to Part 339 
Sample Forms of Notice of Special Flood Hazard and 
Availability of Federal Disaster Relief Assistance 
Two sample versions of this notice form are provided on the following pagesone for use in 
participating communities, and the other for use in non-participating communities. 
Note: Lenders are encouraged to consider whether their collateral interests, in high flood risk 
areas, are adequately protected based on minimal statutory requirements. Lenders can require 
flood insurance limits up to the full RCV of the building, up to NFIP limits, as with other 
lines of insurance. 
Condominium unit owners have unique flood insurance coverage needs that require additional 
consideration. The NFIP designed the Residential Condominium Building Association Policy 
(RCBAP) to address the flood insurance needs of condominium unit owners and associations. 
Please refer to the Condominiums section of these guidelines for information concerning the 
flood insurance coverage options and requirements applicable to lending institutions. 
Appendix 4. Notice Requirements 4-4 

Sample Form for Participating Communities: Notice of Special Flood Hazard and 
Availability of Federal Disaster Relief Assistance 
We are giving you this notice to inform you that: 
 The building or mobile home securing the loan for which you have applied is or will 
be located in an area prone to high flood risks that we call a Special Flood Hazard 
Area (SFHA). 
The area has been identified by the Federal Emergency Management Agency 
(FEMA) as an SFHA using the Flood Insurance Rate Map (FIRM) or the Flood 
Hazard Boundary Map (FHBM) for the community number________________. 
FIRMs are prepared by FEMA in cooperation with the applicable community to 
identify high flood risk and low-to-moderate flood risk areas. The SFHA in which 
your building or mobile home is or will be located has at least a one percent chance 
of a flood equal to or exceeding the base flood elevation (a 100-year flood) in any 
given year. During the life of a 30-year mortgage loan, the risk of flooding in an 
SFHA is 26 percent. 
 Federal law allows a lender and borrower jointly to request the Administrator of 
FEMA to review the determination of whether the property securing the loan is 
located in an SFHA. If you would like to make such a request, please contact us for 
further information. Borrowers may also call a FEMA mapping specialist at (877) 
336-2627 to discuss their concerns. 
 Federal financial assistance, including FEMA disaster assistance, flood mitigation 
grants and federally backed mortgage lending is available in the NFIP participating 
communities. Mandatory flood insurance requirements are applicable to all Federal 
financial assistance. The mandatory flood insurance purchase requirements under 
section 102(b) of the Flood Disaster Protection Act of 1973 are applicable to 
Federally regulated lenders making loans in SFHAs. We will not make you the loan 
that you have applied for if you do not purchase flood insurance. If you fail to renew 
flood insurance on the property, federal law authorizes and requires us to purchase 
the flood insurance for you at your expense. The flood insurance must be maintained 
for the life of your loan. 
-Flood insurance coverage under the NFIP may be purchased through an 
insurance agent who will obtain the policy either directly through the NFIP or 
through a Write Your Own (WYO) company that has agreed to write and 
service NFIP policies on behalf of FEMA. Flood insurance also may be 
available from private insurers that are not Federally backed. 
-At minimum, flood insurance purchased must cover the lowest of: (1) the 
outstanding principal balance of the loan(s); or (2) the maximum amount of 
coverage allowed for the type of building under the NFIP; or (3) the full 
replacement cost value (RCV) of the building and/or contents securing the 
loan. The market value or land value on which the building is located has no 
bearing on the RCV of the building. 
4-5 Appendix 4. Notice Requirements 

 Federal disaster relief assistance, the majority of which is in the form of a low-
interest disaster assistance loan from the Small Business Administration (SBA), may 
be available for losses not covered by your flood insurance policy. Flood insurance 
requirements apply to recipients of Federal disaster assistance grants and SBA 
disaster assistance loans. If you are planning to build a structure or make repairs, 
contact the local communitys chief executive official to determine building 
standards for structures within an SFHA. 
Notice received by _____________________________ Date ___________________ 
Appendix 4. Notice Requirements 4-6 

Sample Form for Non-Participating Community: Notice of Special Flood Hazard and 
Availability of Federal Disaster Relief Assistance 
We are giving you this notice to inform you that: 
 The building or mobile home securing the loan for which you have applied is or will 
be located in an area prone to high flood risks, also known as a Special Flood Hazard 
Area (SFHA). 
-The area has been identified by the Federal Emergency Management Agency 
(FEMA) as an SFHA using the Flood Insurance Rate Map (FIRM) or the Flood 
Hazard Boundary Map (FHBM) for the community number________________. 
FIRMs are prepared by FEMA in cooperation with the applicable community to 
identify high flood risk and low-to-moderate flood risk areas. The SFHA in which 
your building or mobile home is or will be located has at least a one percent 
chance of a flood equal to or exceeding the base flood elevation (a 100-year 
flood) in any given year. During the life of a 30-year mortgage loan, the risk of 
flooding in an SFHA is 26 percent. 
-Federal law allows a lender and borrower jointly to request the Administrator of 
FEMA to review the determination of whether the property securing the loan is 
located in an SFHA. If you would like to make such a request, please contact us 
for further information. Borrowers may also call a FEMA mapping specialist at 
(877) 336-2627 to discuss their concerns. 
 The community in which the property securing the loan is located does not 
participate in the National Flood Insurance Program (NFIP). Federal flood insurance 
is not available. However, private flood insurance may be available on a limited 
basis in the SFHAs of non-participating communities. Federal financial assistance 
including disaster assistance grants or loans and flood mitigation grants are not 
available in SFHAs of non-participating communities. For example, if the nonparticipating community has been identified for at least one year as containing an 
SFHA, properties located in the community will not be eligible for Federal disaster 
relief assistance in the event of a federally declared flood disaster. 
 Conventional loans, loans that are not Federally backed can be made on buildings in 
SFHAs of non-participating communities, if authorized by the regulatory authority 
of the lending institution. However, government guaranteed or insured loans (e.g., 
SBA, VA, and FHA loans) are not permitted to be made in non-participating 
communities, if secured by structures in SFHAs. 
A non-participating community can join the NFIPcontact your local chief executive official 
for additional information. 
Notice received by _________________________________ Date _________________ 
4-7 Appendix 4. Notice Requirements 

Federal Emergency Management Agency 
Washington, DC 20472 
NOTIFICATION OF CHANGE OF SERVICER 
The National Flood Insurance Reform Act (NFIRA) requires federally regulated lending 
institutions and Federal agency lenders to report changes of Servicer. Section 1364 of the 
National Flood Insurance Act of 1968, as amended by Section 527 of NFIRA, provides in 
paragraph (b)(1) that: 
Each Federal entity . . . shall by regulation require lending institutions, in connection 
with the making, increasing, extending, renewing, selling, or transferring any loan 
described in subsection (a)(1), to notify the Director (or the designee of the Director) in 
writing during the term of the loan of the servicer of the loan. Such institutions shall also 
notify the Director (or such designee) of any changes in the servicer of the loan, not later 
than 60 days after the effective date of such change. 
The Federal Emergency Management Agency is requesting that all notices be sent to the Write 
Your Own company (insurance carrier issuing flood policy) or agent of record to endorse the 
flood policy to change the mortgagee or servicer. 
In order to expedite the processing, please submit the following information to the insurance 
company: 
 Borrowers Full Name 
 Flood Insurance Policy Number 
 Property Address (including city/state) 
 Name of Bank or Servicer Reporting the Change 
 Name/Telephone Number of Contact Person 
 Name and Address of New Mortgagee or Servicer 
 Name and Address of New Contact Person 
Appendix 4. Notice Requirements 4-8 

FLOOD INSURANCE RESOURCES 
Federal Emergency Management Agency & National Flood Insurance Program 
Coastal Barrier Resources System (CBRS) 
Areas  Map Panel List 
http://www.fema.gov/business/nfip/cbrs/cbrs.shtm 
Community Status Book http://www.fema.gov/fema/csb.shtm 
FEMA Regional Office List http://www.fema.gov/about/contact/regions.shtm 
Flood Insurance Manual http://www.fema.gov/business/nfip/manual.shtm 
Flood Map Modernization Program, FEMA http://www.fema.gov/plan/prevent/fhm/mm_main.shtm 
Flood Map Orders (FEMA Map Service 
Center) 
http://msc.fema.gov 
Flood Map Technical Questions femamapspecialists@mapmodteam.com 
Flood Zone Determination Companies List http://www.fema.gov/business/nfip/fzone1.shtm 
General Information about Flood Risk, 
Insurance Coverage, Insurance Rates 
http://www.floodsmart.gov 
Information Resource Library, Multimedia http://www.fema.gov/library 
Lender Information & Publications http://www.fema.gov/business/nfip/infol.shtm 
Letters of Map Change (LOMC) Information http://www.fema.gov/hazard/map/lomc.shtm 
Mortgage Portfolio Protection Program 
(MPPP)  Participating WYO Companies List 
http://www.fema.gov/nfipInsurance/mppp.jsp 
NFIP Bureau & Statistical Agent http://bsa.nfipstat.com 
NFIP Direct Servicing Agent http://www.nfipservices.com 
NFIP Regional Office List http://www.fema.gov/business/nfip/nfip_regions.shtm 
Standard Flood Hazard Determination 
Form (SFHDF) 
http://www.fema.gov/business/nfip/sfhdform.shtm 
Standard Flood Insurance Policy (SFIP) http://www.fema.gov/business/nfip/sfip.shtm 
Top Ten Facts Every Lender Needs to 
Know about the NFIP 
http://www.fema.gov/library/viewRecord.do?id=1408 
Training Opportunities for Lenders http://www.fema.gov/business/nfip/trainlen.shtm 
Watermark newsletter & 
e-Watermark online updates 
http://www.fema.gov/business/nfip/wm.shtm 
http://watermark.nfipstat.com/index.htm 
Write Your Own (WYO) Companies List http://www.fema.gov/nfipInsurance/companies.jsp 
5-1 Appendix 5. Flood Insurance Resources 

Federal Entities for Lending Regulation 
Board of Governors of 
the Federal Reserve System (FRS) 
http://www.federalreserve.gov 
202-785-6054 
Farm Credit Administration (FCA) http://www.fca.gov/FCA-HomePage.htm 
703-883-4020 
Federal Deposit Insurance Corporation 
(FDIC)  Bankers Page 
http://www.fdic.gov/quicklinks/bankers.html 
202-898-3912 
National Credit Union Association (NCUA) http://www.ncua.gov 
703-518-6300 
Office of the Comptroller of 
the Currency (OCC) 
http://www.occ.treas.gov 
202-874-4858 
Office of Thrift Supervision (OTS) http://www.ots.treas.gov 
202-906-6288 
Government-Sponsored Enterprises (GSEs) for Housing 
Federal Home Loan Mortgage 
Corporation (Freddie Mac) 
http://www.freddiemac.com 
http://www.allregs.com/fhlmc 
703-903-2000 
Federal National Mortgage 
Association (Fannie Mae) 
http://www.fanniemae.com 
http://www.efanniemae.com 
202-752-7000 
Appendix 5. Flood Insurance Resources 5-2 

30-DAY WAITING PERIOD 
A. Start of Waiting Period 
For flood insurance under the National Flood Insurance Program (NFIP), there is a standard 
30-day waiting period before new applications and endorsements to increase coverage 
become effective. 
1. If the application or endorsement form and the premium payment are received at the NFIP 
within 10 days from the date of application or endorsement request, or if mailed by 
certified mail within 4 days from the date of application or endorsement request, then the 
waiting period will be calculated from the application or endorsement date. Use the 
application date or endorsement date plus 9 days to determine if the application or 
endorsement and premium payment were received within 10 days. When sent by certified 
mail, use the application date or endorsement date plus 3 days to determine if the 
application or endorsement and premium payment were mailed within 4 days. 
2. If the application or endorsement form and the premium payment are received at the NFIP 
after 10 days from the date of application or endorsement request, or are not mailed by 
certified mail within 4 days from the date of application or endorsement request, then the 
waiting period will be calculated from the date the NFIP receives the application or 
endorsement. 
As used in A.1 and A.2 above, the term certified mail extends to not only the U.S. Postal 
Service but also certain third-party delivery services. Acceptable third-party delivery services 
include Federal Express (FedEx), United Parcel Service (UPS), and courier services and the 
like that provide proof of mailing. Third-party delivery is acceptable if the delivery service 
provides documentation of the actual mailing date and delivery date to the NFIP insurer. Bear 
in mind that third-party delivery services deliver to street addresses but cannot deliver to U.S. 
Postal Service post office boxes. 
B. Effective Date 
1. New Policy (other than 2, 3, or 4 below)The effective date of a new policy will be 
12:01 a.m., local time, on the 30th calendar day after the application date and the 
presentment of premium. (Example: a policy applied for on May 3 will become effective 
12:01 a.m., local time, on June 2.) The effective date of coverage is subject to the waiting 
period rule listed under A.1 or A.2 above. 
2. New Policy (in connection with making, increasing, extending, or renewing a loan, 
whether conventional or otherwise)Flood insurance, which is initially purchased in 
connection with the making, increasing, extending, or renewal of a loan, shall be effective 
at the time of loan closing, provided that the policy is applied for and the presentment of 
premium is made at or prior to the loan closing. (Example: presentment of premium and 
application dateApril 3, refinancingApril 3 at 3:00 p.m., policy effective dateApril 
3 at 3:00 p.m.) This rule applies to all buildings regardless of flood zone. The waiting 
period rule listed under A.1 or A.2 above does not apply. 
6-1 Appendix 6. 30-Day Waiting Period 

3. New Policy (in connection with lender requirement)The 30-day waiting period does not 
apply when flood insurance is required as a result of a lender determining that a loan on a 
building in a Special Flood Hazard Area (SFHA) that does not have flood insurance 
coverage should be protected by flood insurance. The coverage is effective upon the 
completion of an application and the presentment of payment of premium. (Example: 
presentment of premium and application dateApril 3, policy effective dateApril 3.) 
The waiting period rule listed under A.1 or A.2 must be used. 
4. New Policy (when the initial purchase of flood insurance is in connection with the 
revision or updating of a Flood Hazard Boundary Map or Flood Insurance Rate Map) 
During the 13-month period beginning on the effective date of the map revision, the 
effective date of a new policy shall be 12:01 a.m., local time, following the day after the 
application date and the presentment of premium. This rule only applies where the Flood 
Hazard Boundary Map (FHBM) or Flood Insurance Rate Map (FIRM) is revised to show 
the building to be in a Special Flood Hazard Area (SFHA) when it had not been in an 
SFHA. (Example: FIRM revisedJanuary 1, 2005, policy applied for and presentment of 
premiumAugust 3, 2005, policy effective dateAugust 4, 2005.) The waiting period 
rule listed under A.1 or A.2 above must be used. This rule applies to all property owners 
including condominium associations. 
5. New Policy (in connection with the purchase of an RCBAP)When a condominium 
association is purchasing a Residential Condominium Building Association Policy 
(RCBAP), the 30-day waiting period does not apply if the condominium association is 
required to obtain flood insurance as part of the security for a loan under the name of the 
condominium association. The coverage is effective upon completion of an application 
and presentment of premium. The waiting period rule listed under A.1 or A.2 above does 
not apply. 
Otherwise, the 30-day waiting period applies, and the waiting period rule listed under A.1 
or A.2 above must be used. 
6. New Policy (submit-for-rate application)With three exceptions (described below), the 
effective date of a new policy will be 12:01 a.m., local time, on the 30th calendar day after 
the presentment of premium. 
The three exceptions are as follows. 
First, there is no waiting period if the initial purchase of flood insurance on a submit-forrate application is in connection with making, increasing, extending, or renewing a loan, 
provided that the policy is applied for and the presentment of premium is made at or prior 
to the loan closing. The waiting period rule listed under A.1 or A.2 above does not apply. 
Second, the 30-day waiting period does not apply when flood insurance is required as a 
result of a lender determining that a loan which does not have flood insurance coverage 
should be protected by flood insurance, because the building securing a loan is located in 
an SFHA. The coverage is effective upon the completion of an application and the 
presentment of payment of premium. This exemption from the 30-day waiting period 
applies only to loans in SFHAs, i.e., those loans for which the statute requires flood 
insurance. The waiting period rule listed under A.1 or A.2 above must be applied. 
Appendix 6. 30-Day Waiting Period 6-2 

Third, during the 13-month period beginning on the effective date of a map revision, the 
effective date of a new policy shall be 12:01 a.m., local time, following the day after the 
date the increased amount of coverage is applied for and the presentment of additional 
premium is made. This rule applies only on an initial purchase of flood insurance where 
the Flood Hazard Boundary Map (FHBM) or Flood Insurance Rate Map (FIRM) is 
revised to show the building to be in an SFHA when it had not been in an SFHA. The 
waiting period rule listed under A.1 or A.2 must be applied. 
7. New Policy (rewrite Standard to PRP)The 30-day waiting period does not apply when 
an insured decides to rewrite the existing policy at the time of renewal from Standard to a 
Preferred Risk Policy (PRP), provided that the selected PRP coverage limit amount is no 
higher than the next highest PRP amount above that which was carried on the Standard 
policy using the highest of building and contents coverage. In those cases where the 
Standard policy has only one kind of coverage, either building or contents only, the 30-day 
waiting period applies. 
In addition, if the structure is no longer eligible under the PRP or the insured decides to 
rewrite the existing PRP at renewal time to a Standard policy, the 30-day waiting 
period does not apply provided the coverage limit amount is no more than the previous 
PRP coverage amount or the next higher PRP amount above that. 
8. New Policy (contents only)Unless the contents are part of the security for a loan, the 
30-day waiting period applies to the purchase of contents-only coverage. 
9. New Policy (documentation required)The insurer may rely on an agents representation 
on the application that the loan exception applies unless there is a loss during the first 30 
days of the policy period. In that case, the insurer must obtain documentation of the loan 
transaction, such as settlement papers, before adjusting the loss. 
10. Communitys Initial Entry (or conversion from Emergency to Regular Program) 
Process according to rules 1 through 9 above and 11 below. 
11. EndorsementsWith two exceptions (described below), the effective date for a new 
coverage or an increase in limits on a policy in force shall be 12:01 a.m., local time, on 
the 30th calendar day following the date of endorsement and the presentment of additional 
premium, or on such later date set by the insured to conform with the reason for the 
change. The waiting period rule listed under A.1 or A.2 above must be used. 
The two exceptions are as follows. 
First, during the 13-month period beginning on the effective date of a map revision, the 
effective date of an endorsement of an existing policy shall be 12:01 a.m., local time, 
following the day after the application date and the presentment of premium. This rule 
applies only where the FHBM or FIRM is revised to show the building to be in an SFHA 
when it had not been in an SFHA. The waiting period rule listed under A.1 or A.2 above 
does not apply. 
Second, the 30-day waiting period does not apply when the additional amount of flood 
insurance is required in connection with the making, increasing, extending, or renewing of 
a loan, such as a second mortgage, home equity loan, or refinancing. The increased 
6-3 Appendix 6. 30-Day Waiting Period 

amount of flood coverage shall be effective at the time of loan closing, provided that the 
increased amount of coverage is applied for and the presentment of additional premium is 
made at or prior to the loan closing. The waiting period rule listed under A.1 or A.2 above 
does not apply. 
The insurer may rely on an agents representation on the endorsement that the loan 
exception applies unless there is a loss during the first 30 days after the endorsement 
effective date. In that case, the insurer must obtain documentation of the loan transaction, 
such as settlement papers, before adjusting the loss. 
12. Renewals (inflation increase option)The 30-day waiting period does not apply when an 
additional amount of insurance is requested at renewal time that is no more than the 
amount of increase recommended by the insurer on the renewal bill to keep pace with 
inflation. If a revised renewal offer is generated at least 30 days before renewal with 
coverage more than the inflation increase option, the new limits will apply at policy 
renewal. 
In either situation, the increased amount of coverage will be effective at 12:01 a.m. on the 
date of policy renewal provided the premium for the increased coverage is received before 
the expiration of the grace period. 
13. Renewals (higher PRP limits)The waiting period does not apply to a renewal offer to 
the insured for the next higher limits available under the PRP. 
14. Renewals (deductible reduction)The 30-day waiting period does not apply to a 
reduction of the deductible effective as of the renewal date. 
Adapted from the May 1, 2007, revision of the NFIP Flood Insurance Manual, General Rules 
section, pages GR 8-10. 
Appendix 6. 30-Day Waiting Period 6-4 

MPPP GUIDELINES AND REQUIREMENTS 
Federal Emergency Management Agency 
Federal Insurance Administration 
Appendix A 
Mortgage Portfolio Protection Program 
Guidelines and Requirements 
Background 
The Mortgage Portfolio Protection Program (MPPP) was introduced on January 1, 1991, as an 
additional tool, provided by the Federal Insurance Administration (FIA), to assist the mortgage 
lending and servicing industries, in response to their requests, in bringing their mortgage 
portfolios into compliance with the flood insurance requirements of the Flood Disaster Protection 
Act of 1973. 
The MPPP is not intended to act as a substitute for the need for mortgagees to review all 
mortgage loan applications at the time of loan origination and comply with flood insurance 
requirements as appropriate. 
It is expected that the proper implementation of the various requirements of this MPPP will result 
in mortgagors, following their notification of the need for flood insurance, to either show 
evidence of such a policy or contact their local insurance agent or appropriate Write Your Own 
(WYO) company to purchase the necessary coverage. It is also intended that flood insurance 
policies be written under the MPPP only as a last resort, and only on mortgages whose 
mortgagors have failed to respond to the various notifications required by this MPPP. 
The following represents the criteria and requirements that must be followed by all parties 
engaged in the sale of flood insurance under the National Flood Insurance Programs Mortgage 
Portfolio Protection Program: 
Requirements for Participating in the MPPP 
1. General 
a. All mortgagors notified, in conjunction with this Program, of their need to purchase 
flood insurance must be encouraged to obtain a Standard Flood Insurance Policy (SFIP) 
from their local agent. 
b. When a mortgagee or a mortgage servicing company discovers, at any time following 
loan origination, that one or more of the loans in its portfolio are determined to be 
located in a Special Flood Hazard Area (SFHA), and that there is no evidence of flood 
insurance on such property(ies), then the MPPP may be used by such lender/servicer to 
obtain (force place) the required flood insurance coverage. The MPPP process can be 
accomplished with limited underwriting information and with special flat flood 
insurance rates. 
7-1 Appendix 7. MPPP Guidelines 

c. In the event of a loss, the policy will have to be reformed if the wrong rate has been 
applied for the zone in which the property is located. Also, the amount of coverage may 
have to be changed if the building occupancy does not support that amount. 
d. It will be the WYO companys responsibility to notify the mortgagor of all coverage 
limitations at the inception of coverage and to impose those limitations that are 
applicable at the time of loss adjustment. 
2. WYO Arrangement Article IIIFees 
With the implementation of the MPPP, there is no change in the method of WYO company 
allowance from that which is provided in the Financial Assistance/Subsidy Arrangement for 
all flood insurance written. 
3. Use of WYO Company Fees for Lenders/Servicers or Others 
a. No portion of the allowance that a WYO company retains under the WYO Financial 
Assistance/Subsidy Arrangement for the MPPP may be used to pay, reimburse or 
otherwise remunerate a lending institution, mortgage servicing company, or other 
similar type of company that the WYO company may work with to assist in its flood 
insurance compliance efforts. 
b. The only exception to this is a situation where the lender/servicer may be actually due a 
commission on any flood insurance policies written on any portion of the institutions 
portfolio because it was written through a licensed property insurance agent on their 
staff or through a licensed insurance agency owned by the institution or servicing 
company. 
4. Notification 
a. WYO Company/MortgageeAny WYO company participating in the MPPP must 
notify the lender or servicer, for which it is providing the MPPP capability, of the 
requirements of the MPPP. The WYO company must obtain signed evidence from each 
such lender or servicer indicating their receipt of this information, and keep a copy in its 
files. An example of such evidence of receipt follows as Addendum 5. 
b. Mortgagee to MortgagorIn order to participate in the MPPP, the lender (or its 
authorized representative, which will typically be the WYO company providing the 
coverage through the MPPP) must notify the borrower of the following, at a minimum: 
(1) The requirements of the Flood Disaster Protection Act of 1973, 
(2) The flood zone location of the borrowers property, 
(3) The requirement for flood insurance, 
(4) The fact that the lender has no evidence of the borrowers having flood insurance, 
(5) The amount of coverage being required and its cost under the MPPP, and 
Appendix 7. MPPP Guidelines 7-2 

(6) The options of the borrower for obtaining conventionally underwritten flood 
insurance coverage and the potential cost benefits of doing so. 
A more detailed discussion of the notification requirements is made a part of this 
program document in both Section 15 and as Addendums 1 and 2. 
5. Eligibility 
a. Type of UseThe MPPP will be allowed only in conjunction with mortgage portfolio 
reviews and the servicing of those portfolios by lenders and mortgage servicing 
companies. The MPPP is not allowed to be used in conjunction with any form of loan 
origination. 
b. Type of PropertyThe standard NFIP rules apply, and all types of property eligible for 
coverage under the NFIP will be eligible for coverage under the MPPP. 
6. Source of Offering 
The force placement capability will be offered by the WYO companies only and not by the 
NFIP Servicing Agent. 
7. Dual Interest 
The policy will be written covering the interest of both the mortgagee and the mortgagor. 
The name of the mortgagor must be included on the Application Form. It is not, however, 
necessary to include the mortgagee as a named insured because the Mortgage Clause 
(Article VII.Q of the Dwelling Form and the General Property Form) affords building 
coverage to any mortgagee named as mortgagee on the Flood Insurance Application. If 
contents coverage for the mortgagee is desired, the mortgagee should be included as a 
named insured. 
8. Term of Policy 
NFIP policies written under the MPPP will be for a term of 1 year (subject to the renewal 
notification process). 
9. Coverage Offered 
Both building and contents coverage will be available under the MPPP. The coverage limits 
available under the Regular Program will be $250,000 for building coverage and $100,000 
for contents. If the WYO company wishes to provide higher limits that are available to other 
occupancy types such as other residential or non-residential, it may do so only if it can 
indicate that occupancy type as appropriate. If the mortgaged property is in an Emergency 
Program Community, then the coverage limits available will be $35,000 for building 
coverage and $10,000 for contents. Again, if the higher limits are desired for other types of 
property, then the building occupancy type must be provided at the inception of the policy or 
when that information may become available, but it must be prior to any loss. 
10. Policy Form 
7-3 Appendix 7. MPPP Guidelines 

The current SFIP Dwelling Form and General Property Form will be used, depending upon 
the type of structure insured. In the absence of building occupancy information, the 
Dwelling Form should be used. 
11. Waiting Period 
The NFIP rules for the waiting period and effective dates apply to the MPPP. 
12. Premium Payment 
The current rules applicable to the NFIP will apply. The lender or servicer (or payor) has the 
option to follow its usual business practices regarding premium payment, so long as the 
NFIP rules are followed. 
13. Underwriting-Application 
a. The MPPP will require less underwriting data than is normally required under the 
standard NFIP rules and regulations. The MPPP data requirements for rating, 
processing and reporting are, at a minimum: 
(1) Name and mailing address of insured (mortgagor; also see Dual Interest), 
(2) Address of insured (mortgaged) property, 
(3) Community name, number, map panel number and suffix, and program type 
(Emergency or Regular), 
(4) Occupancy type (so statutory coverage limits are not exceeded. This data may be 
difficult to obtain. Also see Coverage Offered.), 
(5) NFIP flood zone where property is located (lender must determine, in order to 
decide whether the mandatory purchase requirement applies), 
(6) Amount of coverage, 
(7) Name and address of mortgagee, 
(8) Mortgage loan number, 
(9) Policy number. 
b. No elevation certificates are required as there is no elevation rating. 
c. For more detailed information regarding reporting requirements, see the WYO 
Transaction Record Reporting and Processing (TRRP) Plan. 
Appendix 7. MPPP Guidelines 7-4 

14. Rates 
See the MPPP rate table below. 
MORTGAGE PORTFOLIO PROTECTION PROGRAM RATE AND 
INCREASED COST OF COMPLIANCE (ICC) TABLE1,2,3 
Zone 
MPPP Rates per 
$100 of Building 
Coverage 
MPPP Rates per 
$100 of Contents 
Coverage 
ICC Premium 
for Full $30,000 
Coverage4,5 
Emergency Program 
Community 
$2.77 $2.92 N/A 
A Zones  All building & 
occupancy types, except in 
Zones A99, AR, AR Dual 
$2.77/$1.39 $2.92/$1.39 $75.00 
V Zones  All building & 
occupancy types 
$4.31/$4.31 $4.05/$4.05 $75.00 
Zones A99, AR, AR Dual $0.74/$0.44 $0.98/$0.39 $6.00 
1Before calculating the premium, refer to page MPPP 1 of the current NFIP Flood Insurance Manual 
at http://www.fema.gov/business/nfip/manual.shtm for possible changes to these rates. 
2When calculating the premium, add the $35.00 Federal Policy Fee and, if applicable, the $50.00 Community 
Probation Surcharge. 
3MPPP policies are not eligible for NFIP Community Rating System premium discounts. 
4ICC coverage does not apply to contents-only policies or to individually owned condominium units insured 
under the Dwelling Form or General Property Form. 
5ICC premium is not eligible for the deductible discount. First calculate the deductible discount, then add in the 
ICC premium. 
15. Policy Declaration Page Notification Requirements 
In addition to the routine information, such as amounts of coverage, deductibles and 
premiums, that a WYO company may place on the policy declarations page issued to 
each insured under the NFIP, the following messages are required: 
a. This policy is being provided for you as it is required by Federal law as has been 
mentioned in the previous notices sent to you on this issue. Since your mortgage 
company has not received proof of flood insurance coverage on your property in 
response to those notices, we provide this policy at their request. 
b. The rates charged for this policy may be considerably higher than those that may be 
available to you if you contact your local insurance agent (or the WYO company 
at . . . .). 
c. The amounts of insurance coverage provided in this policy may not be sufficient to 
protect your full equity in the property in the event of a loss. 
7-5 Appendix 7. MPPP Guidelines 

d. You may contact your local insurance agent (or WYO company at . . . .) to replace 
this policy with a conventionally underwritten Standard Flood Insurance Policy, at 
any time, and typically at a significant savings in premium. 
The WYO company may add other messages to the declarations page and make minor 
editorial modifications to the language of these messages if it believes any are necessary 
to conform to the style or practices of that WYO company, but any such additional 
messages or modifications may not change the meaning or intent of the above messages. 
Since the amount of underwriting data obtained at the time of policy inception will 
typically be limited, the extent of any coverage limitations (such as, when replacement 
coverage is not available or coverage is limited because the building has a basement or is 
considered an elevated building with an enclosure) will be difficult to determine. It is, 
therefore, the responsibility of the WYO company to notify the mortgagor/insured of all 
coverage limitations at the inception of coverage and impose any that are applicable at 
the time of the loss adjustment. 
16. Policy ReformationPolicy Correction 
Article VII.G of the Dwelling Form and the General Property Form will apply as 
appropriate. 
Examples of circumstances under which reformation or correction might be needed 
would be: 
a. Policy ReformationThe wrong flat rate was applied for the zone in which the 
property was actually located. 
b. Policy CorrectionThe amount of coverage exceeds the amount available under the 
NFIP for the type of building occupancy that represents the building insured. In such 
cases, the amount of coverage would have to be adjusted to the amount available and 
any appropriate premium adjustments made. 
17. Coverage BasisActual Cash Value or Replacement Cost 
There are no changes from the standard practices of the NFIP for these provisions. The 
coverage basis will depend on the type of occupancy of the building covered and the 
amount of coverage carried. 
18. Deductible 
A $500 Deductible is applicable for policies written under the MPPP. 
19. Federal Policy Fee 
There is no change from the standard practice. The Federal Policy Fee in effect at the 
time the MPPP policy is written must be used. 
20. Renewability 
Appendix 7. MPPP Guidelines 7-6 

The MPPP policy is a 1-year policy. Any renewal of that policy can occur only following 
the full notification process spelled out in Addendum 2 that must take place between the 
lender (or its authorized representative) and the insured/mortgagor, when the 
insured/mortgagor has failed to provide evidence of obtaining a substitute flood 
insurance policy. 
21. Cancellations 
The NFIP Flood Insurance Manual rules for cancellation/nullification are to be followed, 
when applicable. 
22. Endorsement 
An MPPP policy may not be endorsed to convert it directly to a conventionally 
underwritten SFIP. Rather, a new policy application, with a new policy number, must be 
completed according to the underwriting requirements of the SFIP, as contained in the 
NFIP Flood Insurance Manual. The MPPP policy may be endorsed to assign it under 
rules of the NFIP. It may also be endorsed for other reasons such as increasing coverage. 
23. Assignment to a Third Party 
Current NFIP rules remain unchanged; therefore, an MPPP policy may be assigned to 
another mortgagor or mortgagee. Any such assignment must be through an endorsement, 
however. 
24. Article XIIIRestrictions Other Flood Insurance 
Article XIII of the Arrangement is also applicable to the MPPP and, as such, does not 
allow a company to sell other flood insurance that may be in competition with NFIP 
coverage. This restriction, however, applies solely to policies providing flood insurance. 
It also does not apply to insurance policies provided by a WYO company in which flood 
is only one of several perils provided, or when the flood insurance coverage amounts are 
in excess of the statutory limits provided under the NFIP, or when the coverage itself is 
of such a nature that it is unavailable under the NFIP, such as blanket portfolio coverage. 
7-7 Appendix 7. MPPP Guidelines 

Mortgage Portfolio Protection Program (MPPP) Guidelines and Requirements 
Addendum 1 
Initial Portfolio Review Mortgagor Notification Process
Once it has been determined by the lender/servicer or its representative that flood insurance is 
needed on mortgages in the lenders portfolio, and there is no evidence of flood insurance, and it 
decides to use FIAs MPPP to assist in bringing the lenders portfolio into compliance with flood 
insurance requirements, then the following notification process must be used. 
This process will consist of three initial notification letters. Each letter will contain certain 
messages, at a minimum, in the body of the letter. The lender/servicer (or their authorized 
representative) may add their own messages, make minor editorial modifications to the messages 
to conform to the style and practice of the WYO company or lender and structure the letter to 
their liking, but they may not alter the meaning or intent of the messages listed here for any of the 
letters. 
Each letter will contain mandatory messages on one or more of the following items: (1) The 
requirements of the Flood Disaster Protection Act of 1973; (2) reminding the insured of the 
previous letters sent that resulted in the current flood insurance policy; (3) the high premiums on 
the current policy; (4) potentially inadequate coverage limits; (5) coverage limitations; and (6) the 
options available to the insured. 
First Initial Notification Letter 
The first letter is to be issued after the review of the lenders portfolio reveals the need for the 
flood insurance coverage and the absence of it. This letter must contain, at a minimum, the 
following messages: 
1. The Flood Disaster Protection Act of 1973, a Federal law, requires that flood insurance be 
purchased and maintained on mortgage loans for buildings (and their contents, if 
appropriate) for the life of the loan for buildings located in a Special Flood Hazard Area 
(SFHA) shown on a map published by FEMA. This applies to such loans from lending 
institutions that are under the jurisdiction of a Federal regulatory agency or 
instrumentality. 
2. We have determined that your property (building), on which we hold the mortgage loan, is 
located in an SFHA and, therefore, you are required by law to have a policy of flood 
insurance on that property. 
 This letter must then include language advising the mortgagor that in the event they 
wish to challenge the zone determination, they should provide written factual evidence 
supporting their challenge obtained from a community official or registered engineer, 
architect, or surveyor, stating the specifics of the location of the building and the reason 
for their challenge. The letter must include reference to the appeal process required in 
Section 524 of the National Flood Insurance Reform Act of 1994, and to the regulations 
promulgated to establish the procedures and process for such review. 
Appendix 7. MPPP Guidelines 7-8 

 The lender/servicer is reminded that since the Act places the responsibility of 
determining the flood zone location of each mortgaged property on the lender/servicer, 
he cannot discharge that responsibility by simply obtaining some form of self-
certification from the mortgagor. If the lender wishes to change its original 
determination on the location of the mortgagors property based upon information 
submitted by the mortgagor, the lender/servicer must convince itself, after reviewing 
that submission, that its original determination was in error and make any such change 
based on that review. He should not simply accept unsubstantiated allegations, from 
whatever source, as to the buildings flood zone location. The ultimate responsibility for 
making such determinations under the statute rests with the mortgagee, not the 
mortgagor. 
3. There is no evidence in your mortgage loan file of your having a flood insurance policy on 
your property. In case this information is in error, please contact us at . . . . 
4. If you do not have a flood insurance policy on this property, you may wish to contact your 
local insurance agent (or WYO company at . . . .). 
5. If you do not respond within 45 days of this letter, either providing evidence of a flood 
insurance policy in effect on this property, or requesting that we provide you with such 
coverage, the necessary flood insurance coverage will be provided for you. In that event, 
since certain insurance underwriting information about your property that is necessary to 
determine the appropriate flood insurance rate for your policy would not have been obtained, 
due to your not responding, the Federal governments Mortgage Portfolio Protection 
Programs flood insurance rates will have to be used. These rates may be considerably 
higher than those that could be obtained for you if you respond to this notice. 
This letter, or an attachment, must also include such other information as: (1) the name of the 
lender/servicer, (2) the mortgage loan number, (3) the address of the property in question, (4) the 
flood zone in which the property has been determined to be located, (5) the amount of flood 
insurance being required, and (6) coverage limitations. 
Second Initial Notification Letter 
This letter will be sent 30 days following the first initial notification letter, if no response has 
been received from the mortgagor. It will contain, at a minimum, the following messages: 
1. About a month ago you were notified that Federal law requires all mortgages, such as 
yours, on properties determined to be located in a Special Flood Hazard Area, to be covered 
by a policy of flood insurance. 
2. That letter mentioned that if you did not respond positively within 45 days from that letter, 
it would be necessary to obtain a policy of flood insurance for you. 
3. This is to remind you that since you have not responded to the earlier notice as yet, and if 
you do not respond within the next 15 days (or the actual expiration date), flood insurance, 
as mentioned previously, will be obtained on your property, on your behalf. 
4. In the event that you do not respond and the coverage must be obtained as mentioned, the 
cost of that coverage may be significantly higher than the premium that you could obtain if 
you were to contact your local insurance agent (or WYO company at . . . .). 
7-9 Appendix 7. MPPP Guidelines 

Third and Final Initial Notification Letter 
This letter must be sent to the mortgagor accompanying the flood insurance policy declarations 
page. 
This letter must be sent as soon after the end of the 45-day notification period as possible, if no 
positive response has been received to the two previous notification letters. It must contain the 
following messages, at a minimum: 
1. This letter is to inform you that a policy of flood insurance has been obtained on your 
behalf, to cover the mortgage on your property, as required by the Flood Disaster Protection 
Act of 1973. 
2. You have been notified on two previous occasions explaining the circumstances 
surrounding your need to have flood insurance coverage and explaining your options, but to 
date no response has been received. 
3. Attached is the flood insurance policy purchased on your behalf and its accompanying 
declarations page that explains: the amount of coverage purchased on your behalf, its cost, 
some limitations to that coverage, and the options you may still wish to exercise to obtain 
similar coverage, but typically at a significantly lower cost. 
4. If you purchase another flood insurance policy and notify us, or contact us to request that 
we purchase a substitute policy under the NFIP for you, we will cancel this policy and issue 
you a refund for the unearned portion of the premium, if we deem that the other policy is 
acceptable to satisfy the requirements. 
Appendix 7. MPPP Guidelines 7-10 

Mortgage Portfolio Protection Program (MPPP) Guidelines and Requirements 
Addendum 2 
MPPP Renewal/Expiration Mortgagor Notification Process
When an MPPP policy has been purchased and the expiration date of that policy is approaching 
the end of its 1-year term, and the insured has not requested or produced a substitute policy of 
flood insurance, the following notification process will be followed. 
This process will consist of a total of three (or, at the lenders option, two) renewal MPPP letters. 
Each letter will contain certain required messages within the body of the letter. The 
lender/servicer (or their authorized representative) may add their own messages, make minor 
editorial modifications to the messages to conform to the style and practice of the WYO company 
or lender, and structure the letter to their liking, but they may not alter the meaning or intent of 
the messages listed here for any of the letters. 
Each letter will contain mandatory messages on one or more of the following items: (1) 
reminding the insured of the previous letters sent that resulted in the current flood insurance 
policy that is about to expire; (2) the requirements of the Flood Disaster Protection Act of 1973; 
(3) the high premiums on the current policy; (4) potentially inadequate coverage limits; (5) 
coverage limitations; and (6) the options available to the insured. 
First MPPP Renewal/Expiration Notification Letter 
The first MPPP Renewal/Expiration Notification Letter will be sent to the insured/mortgagor at 
least 45 days prior to the renewal/expiration of the MPPP policy. It will, at a minimum, contain 
the following messages: 
1. This letter is to notify you that the flood insurance policy that was required to be purchased 
on your property about a year ago is about to expire. 
2. When you were originally notified of the need for this coverage, it was explained that the 
Flood Disaster Protection Act of 1973, a Federal law, requires that flood insurance be 
purchased and maintained for the life of the loan, on mortgage loans for buildings (and their 
contents, if appropriate) located in a Special Flood Hazard Area shown on a map produced 
by the Federal Emergency Management Agency. 
3. The premium on the flood insurance policy currently in effect and written on your behalf, 
and due to expire, may be considerably higher than would be the case if you had responded 
to the suggestions contained in the previous notices sent you, recommending that you 
contact your local insurance agent (or the WYO company at . . . .), which you may still do, 
to obtain a conventionally underwritten Standard Flood Insurance Policy. 
4. As has been mentioned in previous notices, you may wish to replace this policy with a 
conventionally underwritten Standard Flood Insurance Policy now, and benefit from rates 
that potentially are significantly lower than the rates being used with this policy. 
5. Failure to respond to this notice within 45 days (or by [date]) will result in this policy being 
renewed, and at rates that are most likely to be much higher than are otherwise available. 
7-11 Appendix 7. MPPP Guidelines 

Second MPPP Renewal/Expiration Notification Letter 
The requirement for the second MPPP Renewal/Expiration Notification Letter is optional on the 
part of the participating WYO company. If such a company decides not to issue the second of the 
three notices (letters), then the third MPPP Renewal/Expiration Notification Letter required in the 
March 1, 1991, Federal Register will serve as the second and final notice required. The language 
of such a letter may be modified, if needed, to reflect the fact that only two such letters were sent. 
Third and Final MPPP Renewal/Expiration Notification Letter 
The third and final notice will be sent out as part of the renewed MPPP policy. The notice 
containing the following required messages may be sent as a cover letter or an attachment to the 
policy declarations page and policy itself, or the required messages may be included on the 
declarations page that accompanies the renewal policy. It must contain the following messages: 
1. Since you have not responded to our previous notices that your flood insurance policy, 
which is required by Federal law, was about to expire, we have renewed that policy for the 
next year. 
2. As has been previously explained, the Flood Disaster Protection Act of 1973, a Federal law, 
requires that flood insurance be purchased and maintained on mortgage loans for buildings 
(and their contents, if appropriate) for the life of the loan, for property located in a Special 
Flood Hazard Area shown on a map produced by the Federal Emergency Management 
Agency. 
3. The premium on this flood insurance policy just renewed may be considerably higher than 
would be the case if you had contacted your local insurance agent (or WYO company 
at . . . .), which you may still do, to obtain a conventionally underwritten Standard Flood 
Insurance Policy. 
4. If you purchase another flood insurance policy and notify us, or contact us to request that 
we purchase a substitute policy under the NFIP for you, we will cancel this policy and issue 
you a refund for the unearned portion of the premium, if we deem that the other policy is 
acceptable to satisfy the requirements. 
Appendix 7. MPPP Guidelines 7-12 

Mortgage Portfolio Protection Program (MPPP) Guidelines and Requirements 
Addendum 3 
Questions and Answers: Portfolio Review Considerations 
1. What is the MPPP? 
The MPPP is a tool for providing flood insurance coverage to properties which are part of a 
lending institutions mortgage portfolio when such properties have been determined to be in 
a Special Flood Hazard Area and therefore subject to the flood insurance purchase 
requirement mandated by Federal law. 
2. What is the first step in using the MPPP? 
The MPPP is intended to be utilized only when the lender (or its representative) has 
reviewed its portfolio and determined which of the loans are on buildings located in a 
Special Flood Hazard Area (SFHA), and, therefore, in need of flood insurance. 
3. What source of information should the MPPP participant, or their authorized 
representative, be using in reviewing a loan portfolio, to determine flood zone location 
of the properties in question? 
The flood insurance maps published by the Federal Emergency Management Agency 
(FEMA), augmented by other official documentation available from local officials or other 
sources, as may be deemed necessary, should be used. 
The Flood Disaster Protection Act of 1973, which imposes the flood insurance requirement, 
makes specific reference to areas identified by the Secretary (since changed to Director [of 
FEMA]) as an area having special flood hazards. The National Flood Insurance Act of 1968, as 
amended, charged FEMA with the responsibility of identifying areas which have special 
flood hazards. Therefore, the official source of information that serves as the basis for 
identifying such areas is the maps published by FEMA. 
4. What if a source of information other than the FEMA maps is used as the basis for 
determining the flood zone location of properties? 
The lender may be risking erroneous determinations, thereby potentially placing the lender 
in a position of a liability exposure, bad customer relations and/or problems with its Federal 
regulatory agency or worse. 
5. Does it mean that, if the system used to make these flood zone determinations is not 
based on the FEMA maps, the system should not be used? 
Due to the potential for problems as mentioned above, the lender must be careful as to the 
basis behind the system it uses to make these flood zone determinations. Also, since the 
lender must keep evidence of the determination in every mortgage file, if that evidence 
doesnt reflect the map panel used to make the determination, the lender may have difficulty 
proving to its Federal regulatory agency, or in court if the need arose, that the lender is 
complying with the law. 
7-13 Appendix 7. MPPP Guidelines 

6. What flood zone determination information should the lenders keep in each 
mortgagors file to indicate evidence of compliance? 
Pursuant to Section 528 of the National Flood Insurance Reform Act of 1994, FEMA 
developed a Standard Flood Hazard Determination Form (SFHDF) for use by lenders when 
determining, in the case of a loan secured by improved real estate or a mobile home, whether 
the building or mobile home is located in a special flood hazard area. The SFHDF contains a 
section for recording flood zone determination information. All lenders subject to the 
Reform Act will have to place a copy of the SFHDF in each mortgagors file to indicate 
evidence of compliance. 
7. What version of the flood map should be used in conjunction with the MPPP portfolio 
review? 
The FEMA map in effect at the time of the portfolio review is the map that must be used. 
The provisions of the Flood Disaster Protection Act of 1973 as amended by the Reform Act: 
(1) require the lender to notify the borrower that the borrower should obtain flood insurance, 
at the borrowers expense, if, at any time during the term of the loan, the lender determines 
the improved real estate or mobile home securing the loan is located in an area identified by 
FEMA as an area having special flood hazards and in which flood insurance is available but 
the property is not covered by flood insurance; and (2) require the lender to purchase 
coverage on behalf of the borrower if the borrower fails to purchase such flood insurance 
within 45 days after notification by the lender. 
8. Doesnt the fact that the MPPP was designed to assist lenders/servicers in bringing 
their portfolios into compliance with flood insurance requirements mean that they will 
be dealing with loans that can range from being very new to being many years old, and 
that the maps that may have been in effect at the time of the loan origination might not 
be readily available now? 
Yes. However, this does not present a problem since, as mentioned in question 7 above, 
compliance with the Reform Act requires use of the map in effect at the time of the review 
rather than the map in effect at the time of the loan origination. 
9. Once the lender/servicers portfolio has been reviewed and determinations have been 
made as to which properties need flood insurance, is there anything critical that the 
lender (or its representative) should consider before beginning the process of mailing 
the initial notices to their mortgagors? 
The lender should consider how the mailing will be handled and the results of that mailing. 
There is a strong likelihood that, once the mailings begin, a certain percentage of the 
mortgagor recipients of those notices will challenge the notices. Some of those challenges 
will be directed, in one way or another, to the lender/servicer, regardless of any instructions 
in the notices. The lender should therefore determine at the outset whether it wants the 
notices to be sent all at once, or sent in batches. The larger the volume, the more 
consideration to the batch approach that should be given. 
Also, the lender needs to consider how it wants the review of its portfolio carried out. If the 
results of the review are provided to the lender all at the same time and the lender decides to 
send the notices to the mortgagors in batches, it may be exposing itself to additional liability. 
Appendix 7. MPPP Guidelines 7-14 

This could occur since the lender was aware of all the mortgages in its portfolio that needed 
flood insurance, but acted on only a certain number at a time. The lender, therefore, needs to 
consider having the portfolio review carried out in such a fashion that the results of each 
portion of that review are made available to the lender as soon as they are available from the 
party conducting the review, and are acted upon as soon as possible thereafter. 
7-15 Appendix 7. MPPP Guidelines 

Mortgage Portfolio Protection Program (MPPP) Guidelines and Requirements 
Addendum 4 
Questions and Answers: Other Considerations 
1. What is the MPPP and what is it designed to do? 
The MPPP is a tool made available to the lending and mortgage servicing industries that 
provides them with the capability to write flood insurance policies quicker and easier that 
will assist them with their efforts to bring their portfolios into compliance with flood 
insurance requirements. 
2. Is the MPPP available to lenders for all their loans? 
No. It may be used in only conjunction with loan portfolios. It may not be used as a 
compliance vehicle for loan originations. 
3. Is the MPPP mandatory for lenders/servicers? 
No. It is voluntary, but lenders/servicers that believe their loan portfolios may not be in 
compliance with flood insurance requirements are strongly encouraged to use it if they 
believe it could be helpful. 
4. What are the benefits of the MPPP? 
The specific benefits will vary with the category of participant as follows. 
For lenders/servicers: 
 Portfolio compliance with flood insurance requirements. 
 Reduction or elimination of certain potential liability. 
 Protection of equity (lender/servicer, borrower). 
For WYO companies: 
 Increased policy sales and fees. 
 Increased lender/servicer client base. 
For insurance agents: 
 Increased policy sales and commissions. 
5. Is it possible for WYO companies and insurance agents to benefit from the MPPP even 
if they dont directly participate in it? 
Yes. Property insurance (fire and auto) is already being sold by insurance agents to many of 
these same borrowers because lenders require it in conjunction with home mortgages and 
auto loans. As a result, many agents already have established business relationships with 
their local lenders. These agents could alert these lenders to the availability of the MPPP and 
advise them as to how to proceed even if the agent was not going to directly participate. 
Appendix 7. MPPP Guidelines 7-16 

At the same time the agent could offer to assist the lender with determining the flood zone 
location of the addresses of all new mortgage loan applications for that lender and ask, in 
return, for the opportunity to write all the flood insurance policies on those properties that 
are determined to need it. The notices that will be sent to the borrowers will generate 
inquiries and sales. 
6. How will flood policies actually be sold under the MPPP? 
Policies will be written through the insurance companies participating in the Write Your 
Own (WYO) Program. 
7. Will all the insurance companies participating in the WYO Program be writing policies 
under the MPPP? 
Any WYO company may write policies under the MPPP, but only those that traditionally 
have dealt with the lending industry participate in this Program. Any such company that 
does wish to participate must agree in writing to comply with the requirements of the MPPP. 
8. Does FIA maintain and publish a list of the WYO companies that participate in the 
MPPP? 
Yes. Such a list has been developed and is modified and republished as needed. 
9. What is the first thing a lender/servicer should do if it wishes to utilize the MPPP? 
The lender must review its loan portfolio and determine which of the properties are located 
in Special Flood Hazard Areas (SFHA). 
10. When a lender/servicer decides to utilize the MPPP, must they use the MPPP to service 
their portfolio all at the same time? 
No. Lenders/servicers should carefully analyze the pros and cons of phasing in their portfolio 
compliance effort. (See Addendum 3, question 9.) 
11. Is use of the MPPP limited to only those properties located in SFHAs? 
Yes. 
12. What will happen if a policy is written through the MPPP, but the property is not 
located in an SFHA? 
If no loss has occurred at the time the situation is discovered but the mortgagee wants the 
borrower to have flood insurance even though the property is not in an SFHA, the situation 
can be corrected by cancelling the MPPP policy and rewriting the coverage under a 
conventional Standard Flood Insurance Policy (SFIP) with a refund of any premium 
overpayment. If such a situation is discovered after a flood loss has occurred, the claim will 
be honored. However, the MPPP policy would have to be cancelled and the coverage 
rewritten under a conventional SFIP with a refund of any premium overpayment. The loss 
should then be reported under the new policy number. Under both scenarios, the effective 
date of the conventional SFIP would be the same as that of the cancelled MPPP policy. 
7-17 Appendix 7. MPPP Guidelines 

13. What differences are there between a flood policy sold under the traditional flood 
insurance program and one under the MPPP? 
The actual policy and coverage are the same, but there are differences primarily in the areas 
of: 
 rates, 
 a letter notification process to the borrowers, 
 the underwriting information necessary. 
14. What are the rate differences? 
The rates under the MPPP are, on the average, several times those used under the traditional 
flood insurance program. 
15. Why are the MPPP rates so high? 
Because the borrower did not respond to the notices sent, key information necessary to 
underwrite the risk is not available. Therefore, it is necessary to assume that those properties 
have a very high risk and the rates charged reflect that risk. 
16. Does the borrower have any option in avoiding the MPPP policy with its higher cost? 
Yes. The borrower can simply contact a local insurance agent, obtain a conventionally 
underwritten flood insurance policy, and present it to the lender/servicer. 
17. If a borrower pays off the mortgage loan, can the MPPP then be cancelled? 
Yes, but any refund due the borrower will be paid on a pro-rata basis. 
18. If the borrower or lender/servicer sells or assigns the mortgage to another borrower or 
lender/servicer, can the MPPP policy be assigned? 
Yes. The Standard Flood Insurance Policy language allows for the assignment of all NFIP 
policies. Any such assignment of an NFIP policy must be done by way of an endorsement. 
19. Must a WYO company participating in the MPPP maintain copies of all its MPPP 
documents? 
The companies are responsible for the data on each Application Form, in keeping with its 
normal practices. Although some of the data beyond that required does not have to be 
reported, the companies are still responsible for it. The WYO companies may use their 
normal business practices in determining which form they will use to retain data, forms, or 
other required information. 
20. Who initiates the notification letter process required by the MPPP? 
Appendix 7. MPPP Guidelines 7-18 

Lenders/servicers differ on how their force-placed hazard insurance notices are sent to their 
borrowers. Some lenders insist on sending such notices directly. Others let the insurance 
company, with whom the force-placed policies are written, send out the notices. Since the 
MPPP is a part of the NFIP, then any policies written through the MPPP must comply with 
all NFIP requirements, regardless of the entity that actually sends the notices. 
21. Must the lender or WYO company maintain copies of the notification letters? 
The WYO company is responsible for assuring that the letters are sent regardless of whether 
the company or the lender actually sends them. The WYO company must maintain evidence 
that the letters are being sent. It will be the WYO companys decision as to the form the 
evidence takes, such as paper copies, microfiche, computer images, or a record of addresses 
of the mortgagors to whom the letters were sent with an indication as to the date when those 
mortgagors were notified. 
22. What does a WYO company do if all of the information that FIA requires on the 
declarations page wont fit on that page? 
The company may wish to include some of that information on the declarations page and 
some on an endorsement. In such a case, it should indicate an endorsement number on the 
declarations page. 
23. Does a policy declarations page have to be issued each time an MPPP policy is 
renewed? 
Yes, and it must accompany the final renewal notification letter. 
24. When an MPPP is renewed, can the same policy number that was assigned to the 
original MPPP policy be used? 
Yes. 
25. Will the rating credits that will be available in a community participating in the 
Community Rating System (CRS) apply to a policy written under the MPPP? 
No. 
26. The MPPP requirements call for the full map panel number and date to be obtained. 
What does the WYO company do with that information since the NFIP Application 
Form in use today doesnt contain enough space to even capture all this information? 
The WYO companies have never been required to use NFIP forms in the WYO program, but 
have been free to develop their own forms. They are, however, responsible for all required 
data, some of which must be reported and some of which isnt, but must be kept in the 
company files. The data requirements for the MPPP follow the same conditions. The full 
map panel number for that panel used to determine flood zone location and rate the policy is 
the one that must be captured and maintained. The majority of the maps FEMA has 
published for many years have the 10-digit number, suffix, and date for each panel. Some of 
the maps still in use have only the 6-digit community number and date. The 6-digit 
community number cannot be used when the 10-digit number exists. 
7-19 Appendix 7. MPPP Guidelines 

27. Is contents coverage under the MPPP optional? 
Yes. The lender must decide whether or not it will require contents coverage as part of the 
MPPP policy. 
28. What is meant by the term coverage limitations that is mentioned in the MPPP 
materials? 
Coverage limitations primarily means Actual Cash Value coverage instead of 
Replacement Cost coverage, when appropriate. It could also apply, however, to the situation 
where only an amount to cover the loan balance is purchased which may be insufficient to 
cover the full insurable value of the property. The WYO company will have to determine 
what limitations may apply depending on the decisions of the lender/servicer as to how it 
wants to use the MPPP and the amount of underwriting information obtained. 
29. The notification process contains standards for the letters being mailed and the MPPP 
policy being written such as 45, 30, and 15 days. Must these standards be strictly 
adhered to? 
There are a number of standards similar to this in the NFIP. Some limited flexibility has been 
built into the actual implementation process through the underwriting review process that 
FIA uses with the companies. 
30. May WYO companies, under the requirements of the MPPP, use any portion of the 
MPPP fee they retain for any purpose other than as a commission to an insurance 
agent or agency for their writing the policy, such as for flood zone determinations or 
the tracking of loans? 
No. 
Appendix 7. MPPP Guidelines 7-20 

Mortgage Portfolio Protection Program (MPPP) Guidelines and Requirements 
Addendum 5 
Receipt for Materials
The Federal Insurance Administration (FIA) has published a package of materials for 
implementation of the National Flood Insurance Programs Mortgage Portfolio Protection 
Program (MPPP) by WYO companies and lending institutions and/or mortgage servicing or 
similar companies. The implementation package contains the following: 
 Cover letter from the FIA Administrator 
 Guidelines and Requirements 
 Addendum 1, Initial Portfolio Review Mortgagor Notification Process 
 Addendum 2, MPPP Renewal/Expiration Mortgagor Notification Process 
 Addendum 3, Questions and Answers: Portfolio Considerations 
 Addendum 4, Questions and Answers: Other Considerations 
 Addendum 5, Receipt for Materials (this document) 
 Addendum 6, Agreement to Adhere to the Guidelines and Requirements 
Any WYO company that offers the MPPP to a lender/servicer must provide this Receipt and the 
following Agreement (Addendum 6), together with the complete implementation package 
referenced above, to the lender/service. To participate in the MPPP as a means of bringing its 
portfolio into compliance with flood insurance requirements, the lender/servicer must sign this 
Receipt and the following Agreement as evidence of having received the implementation package 
and agreeing to comply with the guidelines and requirements contained therein. 
This Addendum is to acknowledge that the package of implementation materials for the National 
Flood Insurance Programs Mortgage Portfolio Protection Program (MPPP) has been provided 
and received on the date(s) indicated. 
Name of WYO companys Name of lender/mortgage servicers 
representative providing package representative receiving package 
Name of WYO company represented Name of lender/mortgage servicer 
represented 
Date package provided Date package received 
WYO companies are required to keep a copy of this Receipt and the following Agreement in 
their files for each lender/mortgage servicer to which they provide services under the Mortgage 
Portfolio Protection Program. Lenders/mortgage servicers may wish to do the same. 
7-21 Appendix 7. MPPP Guidelines 

Mortgage Portfolio Protection Program (MPPP) Guidelines and Requirements 
Addendum 6 
Agreement to Adhere to the Guidelines and Requirements of 
the Mortgage Portfolio Protection Program, 2006-2007 
In conjunction with acceptance of the offer by the Federal Insurance Administration (FIA) to 
enter into a Financial Assistance/Subsidy Arrangement, Write Your Own companies may 
optionally elect to participate in the Mortgage Portfolio Protection Program (MPPP) of the 
National Flood Insurance Program. To participate in the MPPP, the Write Your Own company 
must agree to adhere to all Guidelines and Requirements contained in the implementation 
package published by FIA. This Addendum is to indicate and provide evidence of the companys 
acceptance of these terms. 
Please complete the section below for the individual in your organization designated as the 
contact person for MPPP services and questions. 
A separate form must be submitted for each company. 
MPPP Contact Name __________________________________________________ 
Address ________________________________________________ 
Telephone Number _______________________________________ 
In witness whereof, the parties hereto have accepted this Agreement on this ____ day 
of _____________________, 2006. 
Group/ParentCompany _________________________________________________ 
Writing Company ________________________________ NAIC Number _________ 
By __________________________________________________________________ 
Print Name___________________________________________________________ 
Title ________________________________________________________________ 
The United States of America 
U.S. Department of Homeland Security 
Federal Emergency Management Agency 
Acknowledged ________________________________ 
Administrator 
Federal Insurance Administration 
Appendix 7. MPPP Guidelines 7-22 

GLOSSARY 
This list of terms and definitions includes many of the significant concepts that are central to 
the operation of the National Flood Insurance Program (NFIP), which is administered by the 
Federal Emergency Management Agency (FEMA). In a few instances, standard mortgage 
lending industry terms have been added. 
Act. The National Flood Insurance Act of 
1968 and any amendments to it. 
Actual Cash Value (ACV). The cost to 
replace an insured item of property at the 
time of loss, less the value of its physical 
depreciation. 
Administrator. The Administrator (formerly known as Director) of the Federal 
Emergency Management Agency. 
Agent. One who solicits, negotiates, or 
effects contracts of insurance on behalf of an 
insurer, including a Write Your Own 
insurer. An agent who produces direct 
business is deemed the agent of the insured, 
not of the Federal Government. 
Application. The statement made and 
signed by the prospective policyholder or 
the agent in applying for an NFIP flood 
insurance policy. The application gives 
information used to determine the eligibility 
of the risk, the kind of policy to be issued, 
and the correct premium payment. The 
application is part of the flood insurance 
policy. For a policy to be issued, the correct 
premium payment must accompany the 
application. 
Assignment. The transfer by a policyholder 
of his/her legal right or interest in a policy 
contract to a third party. In the NFIP, written 
assignment of a policy is permissible upon 
transfer of title, without the consent of 
FEMA, except in the case where a 
residential (household) contents-only policy 
is involved or the policy was issued to cover 
a building in the course of construction. 
Base Flood. A flood having a 1-percent 
chance of being equaled or exceeded in any 
given year. 
Base Flood Elevation (BFE). The elevation 
shown on the Flood Insurance Rate Map for 
Zones AE, AH, A1-A30, AR, AR/A, 
AR/AE, AR/A1-A30, AR/AH, AR/AO, 
V1-V30, and VE that indicates the water 
surface elevation resulting from a flood that 
has a 1-percent chance of equaling or 
exceeding that level in any given year. 
Binder or Certificate of Insurance. A 
temporary agreement between company, 
producer, and insured that the policy is in 
effect. Binders and certificates of insurance 
are not permitted under the NFIP. 
Blanket Insurance. A single amount of 
insurance applying to more than one 
building and/or its contents. Blanket 
coverage is not permitted under the NFIP. 
Building (Eligible Building). 
 A structure with two or more outside 
rigid walls and a fully secured roof, that 
is affixed to a permanent site; or 
 A manufactured home (a manufactured 
home, also known as a mobile home, is 
a structure built on a permanent chassis, 
transported to its site in one or more 
sections, and affixed to a permanent 
foundation); or 
 A travel trailer without wheels, built on 
a chassis and affixed to a permanent 
foundation, that is regulated under the 
communitys floodplain management 
and building ordinances or laws. 
Building does not mean a gas or liquid 
storage tank or a recreational vehicle, park 
GLS 1 Glossary 

trailer, or other similar vehicle, except as 
described above. 
Building in the Course of Construction. A 
walled and roofed building that is 
principally above ground and affixed to a 
permanent site. It does not include building 
materials or supplies intended for use in 
construction, alteration, or repair unless 
such materials or supplies are within an 
enclosed building on the premises. 
Cancellation. The ending of the insurance 
coverage provided by a policy before the 
expiration date. 
Chattel Mortgage. A mortgage on personal 
property; the creation of a lien as security on 
chattel that, for purposes of the NFIP, 
includes contents items as well as a mobile 
home. 
Civil Money Penalties. Administrative 
sanctions that lenders incur if they do not 
comply with the 1994 National Flood 
Insurance Reform Act. An institution can 
incur up to $100,000 per year in penalties. 
Coastal Barrier. A naturally occurring 
island, sandbar, or other strip of land, 
including coastal mainland, that protects the 
coast from severe wave wash. 
Coastal Barrier Improvement Act (CBIA) 
of 1990. This Federal law greatly expanded 
the identified land in the Coastal Barrier 
Resources System established pursuant to 
the Coastal Barrier Resources Act of 1982. 
Coastal Barrier Resources Act (CBRA) of 
1982. For the purposes of the NFIP, this 
Federal law designated certain portions of 
the Gulf and East Coasts as undeveloped 
coastal barriers. These areas are shown on 
appropriate flood insurance map panels and 
have certain coverage restrictions. 
Coastal Barrier Resources System 
(CBRS). Communities, coastal barriers, and 
other protected areas identified by the 
Department of the Interior legislation 
defined above. 
Coastal High Hazard Areas. Special Flood 
Hazard Areas along the coasts that have 
additional flooding hazards due to wind and 
wave action. These areas are identified on 
Flood Insurance Rate Maps as Zones V, 
V1-V30, and VE. 
Code of Federal Regulations (CFR). The 
codification of the general and permanent 
rules initially published in the Federal 
Register by the executive departments and 
agencies of the Federal Government. 
Coinsurance. A penalty imposed on the loss 
payment unless the amount of insurance 
carried on the damaged building is at least 
80 percent of its replacement cost or the 
maximum amount of insurance available for 
that building under the NFIP, whichever is 
less. Coinsurance applies only to building 
coverage under the Residential Condominium Building Association Policy. 
Community. A political entity that has the 
authority to adopt and enforce floodplain 
ordinances for the area under its jurisdiction. 
Community Number. A 6-digit designation 
identifying each NFIP community. The first 
two numbers are the state code. The next 
four are the FEMA-assigned community 
number. An alphabetical suffix is added to a 
community number to identify revisions in 
the Flood Insurance Rate Map for that 
community. 
Community Rating System (CRS). A 
program developed by FEMA to provide 
incentives for those communities in the 
Regular Program that have gone beyond the 
Glossary GLS 2 

minimum floodplain management requirements to develop extra measures to provide 
protection from flooding. 
Compendium of Flood Map Changes. A 
document published every 6 months by the 
Administrator of FEMA that includes 
separately in their entirety all changes and 
revisions to Flood Insurance Rate Map 
panels and all Letters of Map Amendment 
and Letters of Map Revision for which 
notice was published in the Federal Register 
or otherwise provided during the preceding 
6 months. The Administrator makes these 
compendia available, free of charge, to 
Federal entities for lending regulation, 
Federal agency lenders, and States and 
communities participating in the NFIP, and 
at cost to all other parties. 
Condominium. That form of ownership of 
real property in which each unit owner has 
an undivided interest in common elements. 
Condominium Association. The entity 
made up of the unit owners responsible for 
the maintenance and operation of: 
 Common elements owned in undivided 
shares by unit owners; 
 Other real property in which the unit 
owners have use rights; 
where membership in the entity is a required 
condition of unit ownership. 
Conforming Loan. A mortgage loan that 
meets all the requirements (size, type, and 
age) to be eligible for purchase or 
securitization by a Government-Sponsored 
Enterprise for Housing. 
Conventional Loan (Financing). A real 
estate mortgage extended by a lender where 
the loan is not insured or guaranteed by a 
government agency such as the Federal 
Housing Administration, Department of 
Veterans Affairs, or Farmers Home 
Administration. 
Cooperative. That form of ownership of 
real property in which each unit owner holds 
an interest in a building by contract or share, 
but owns no title to the building. The NFIP 
does not issue a Dwelling Form policy to 
unit owners in a cooperative. 
Cooperative Association. The cooperative 
corporation, which because it owns the land 
and improvements, has the insurable interest 
in the building and is eligible to obtain NFIP 
flood insurance coverage under the General 
Property Form. 
Declarations Page. A computer-generated 
summary of information provided by the 
prospective policyholder in the application 
for flood insurance. The Declarations Page 
also describes the term of the policy and the 
limits of coverage and displays the premium 
and the insurers name. The Declarations 
Page is a part of the flood insurance policy. 
Deductible. The portion of an insured loss 
to be borne by the insured before the insured 
is entitled to recovery from the insurer. The 
NFIP applies the deductible separately to the 
building and contents portion of a loss 
covered by the Standard Flood Insurance 
Policy. In the NFIP Regular Program, the 
standard deductible is $500 except for Pre-
FIRM risks in Special Flood Hazard Areas, 
which have a $1,000 standard deductible. 
Other deductible amounts are available, and 
special deductibles apply to the expense of 
contents and manufactured (mobile) home 
removal. In the Emergency Program, the 
standard deductible is $1,000 for all risks. 
(Refer to the Rating and Condominiums 
sections of the NFIP Flood Insurance Manual for more information about deductibles.) 
Deductible Buyback. The option whereby, 
for an additional premium, policyholders 
who wish to reduce their deductibles from 
the standard deductibles of $1,000 per 
building loss and per contents loss for Pre-
FIRM risks in Special Flood Hazard Areas 
may purchase separate $500 deductibles for 
building and contents coverages. 
GLS 3 Glossary 

Depreciation. A decline in value of a 
building or other real estate improvement, 
resulting from age, physical wear, or 
functional obsolescence. 
Designated Loan. A loan secured by a 
building or manufactured (mobile) home 
located or to be located in a Special Flood 
Hazard Area, where flood insurance is 
available under the 1968 Act. 
Determination Review. An appeal process 
performed by FEMA to resolve disputes 
posed by borrowers and lenders/servicers 
concerning properties found to be in Special 
Flood Hazard Areas. A fee is charged, and 
the request must be signed jointly by the 
lender or servicer and borrower. Elevation 
data is not considered. The requester 
receives a Letter of Determination Review 
stating whether the structure was found to be 
inside or outside an SFHA. 
Director. The Administrator of the Federal 
Emergency Management Agency. 
Dwelling Form. See Standard Flood Insurance PolicyDwelling Form. 
Elevated Building. A building that has no 
basement and that has its lowest elevated 
floor raised above ground level by 
foundation walls, shear walls, posts, piers, 
pilings, or columns. Solid perimeter foundation walls are not an acceptable means of 
elevating buildings in V and VE Zones. 
Elevation Certificate. A certified statement 
that verifies a buildings elevation and 
certain other construction characteristics 
needed to rate the building for flood 
insurance under the NFIP. The information 
required and the risks subject to these 
requirements are described in the Special 
Certifications section of the NFIP Flood 
Insurance Manual. 
Emergency Program. The initial phase of a 
communitys participation in the NFIP. 
During this phase, only limited amounts of 
insurance are available under the Act. 
Escrow Requirement. A mandate placed on 
federally regulated lending institutions by 
the National Flood Insurance Reform Act of 
1994 to escrow for flood insurance 
premiums under specified circumstances. 
Evidence of Insurance. Copies of the Flood 
Insurance Application, premium payment, 
and Declarations Page that, when submitted 
to the lender, constitute proof of flood 
insurance purchase. The NFIP does not 
recognize binders or certificates of 
insurance. 
Expense Constant. A flat fee formerly 
charged on each new and renewal policy, 
the Expense Constant was eliminated 
effective May 1, 2003, and no longer affects 
the premium calculation for new and 
renewal business. However, the Expense 
Constant may affect the calculation of 
refunds going back prior to May 1, 2003, for 
policy cancellations and endorsements. 
Farm Credit Administration (FCA). The 
Federal agency responsible for regulating 
and examining the institutions that make up 
the Farm Credit System, authorized by the 
Farm Credit Act of 1971. 
Federal Agency Lenders. The Small 
Business Administration, the Federal 
Housing Administration, the agencies within 
the U.S. Department of AgricultureRural 
Develop-ment, and the Department of 
Veterans Affairs, all of which are subject to 
the mandatory purchase requirement in the 
1994 Reform Act. These agencies were 
covered by the 1973 Act purchase 
requirements. 
Federal Deposit Insurance Corporation 
(FDIC). The Federal agency that regulates 
Glossary GLS 4 

State-chartered and insured nonmember 
banks and savings banks that are not part of 
the Federal Reserve System. 
Federal Emergency Management Agency 
(FEMA). The Federal agency under which 
the NFIP is administered. In March 2003, 
FEMA became part of the newly created 
U.S. Department of Homeland Security. 
Federal Home Loan Mortgage Corporation (Freddie Mac). A privately owned, 
federally chartered agency that purchases 
loans (usually for residential, one- to four-
family unit dwellings) from lenders as part 
of the secondary market for home 
mortgages. See also Government-Sponsored 
Enterprises for Housing. 
Federal Insurance Administrator. FEMAs 
Assistant Administrator for Mitigation, who 
also is charged with implementing and 
overseeing the NFIP. 
Federal National Mortgage Association 
(Fannie Mae). A privately owned, federally 
chartered agency that, like Freddie Mac, 
purchases loans (usually for residential, one- 
to four-family unit dwellings) from lenders 
as part of the secondary market for home 
mortgages. Together, Fannie Mae and 
Freddie Mac are the primary investors in the 
secondary market. See also Government-
Sponsored Enterprises for Housing. 
Federal Policy Fee. A flat charge that the 
policyholder must pay on each new or 
renewal policy to defray certain administrative expenses incurred in carrying out the 
NFIP. 
Federal Register. The document published 
daily by the U.S. Government that presents 
regulations and legal notices issued by 
Federal agencies, including proposed and 
final Base Flood Elevation determinations. 
Federally Regulated Lending Institutions. 
Any banks, savings and loan associations, 
credit unions, farm credit banks, Federal 
land bank associations, production credit 
associations, or similar institutions subject 
to the supervision of a Federal entity for 
lending regulation, such as the Office of the 
Comptroller of the Currency, the Office of 
Thrift Supervision, the Federal Reserve 
System, the Federal Deposit Insurance 
Corporation, the Farm Credit Administration, and the National Credit Union 
Administration. 
FHBM. See Flood Hazard Boundary Map. 
Financial Assistance/Subsidy Arrangement. 
The arrangement between an insurance 
company and FEMA to initiate, and 
annually renew, the companys participation 
in the Write Your Own Program. It 
stipulates the duties of the company and the 
government. 
FIRM. See Flood Insurance Rate Map. 
500-Year Flood. A flood that has a 0.2-percent 
chance of being equaled or exceeded in any 
year. Areas subject to the 500-year flood 
have a moderate to low risk of flooding. 
These areas include flood Zones B, C, and X, 
where one-to four-unit buildings are 
eligible for the Preferred Risk Policy. A 
500-year flood would be deeper than a 100year flood and would cover a greater area. 
Flood. 
 A general and temporary condition of 
partial or complete inundation of two or 
more acres of normally dry land area or 
of two or more properties (at least one of 
which is the policyholders property) 
from: 
 Overflow of inland or tidal waters; 
 Unusual and rapid accumulation or 
runoff of surface waters from any 
source; or 
 Mudflow; or 
 Collapse or subsidence of land along the 
shore of a lake or similar body of water 
as a result of erosion or undermining 
GLS 5 Glossary 

caused by waves or currents of water 
exceeding anticipated cyclical levels that 
result in a flood as defined above. 
Flood Hazard Boundary Map (FHBM). 
The official map of a community issued by 
FEMA, where the boundaries of the flood, 
mudflow, and related erosion areas having 
special hazards have been designated. 
Flood Insurance Manual. The NFIPs 
official manual that describes the Program 
for property/casualty agents who sell 
federally backed flood insurance or wish to 
qualify to do so. The manual explains 
Program rules and regulations; policy 
provisions and coverage limits; risk rating 
methods; and procedures for completing and 
submitting forms to place, change, or cancel 
flood insurance coverage. 
Flood Insurance Rate Map (FIRM). The 
official map of a community on which 
FEMA has delineated both the Special 
Flood Hazard Areas and the risk premium 
zones applicable to the community. NFIP 
Regular Program communities have FIRMs. 
Flood Map Status Information Service. A 
subscription service through which the 
FEMA Map Service Center sells 
information about community status, map 
effective dates, etc., on CD-ROM. 
Flood Zone. One of the lettered geographical areas shown on FEMA Flood Hazard 
Boundary Maps and Flood Insurance Rate 
Maps to indicate risk, severity, or type of 
flooding. 
 Zones that begin with the letters A and 
V are areas of high flood risk, or Special 
Flood Hazard Areas, where the purchase 
of flood insurance as a condition for 
granting a designated loan is required. 
 Zones B, C, D, and X are areas of low to 
moderate flood risk, where the purchase 
of flood insurance as a condition for grant-
ing a designated loan is not required but 
should be encouraged by lenders. 
Historically, about one-quarter of all NFIP 
claims have originated in these areas. 
See also Special Flood Hazard Area. 
Flood Zone Determination Vendor. An 
organization that makes flood zone 
determinations on individual properties and 
monitors map changes. See also Third-Party 
Flood Zone Determination Companies. 
Floodplain. Any land area susceptible to 
being inundated by flood waters from any 
source. 
Floodplain Management. The operation of 
an overall program of corrective and 
preventive measures for reducing flood 
damage, including but not limited to, 
emergency preparedness plans, flood control 
works, and floodplain use regulations. 
Floodproofing. Any combination of structural and nonstructural additions, changes, 
or adjustments to structures, which reduce or 
eliminate risk of flood damage to real estate 
or improved real property, water and 
sanitation facilities, or structures with their 
contents. 
Floodproofing Certificate. An NFIP form 
that, in certain circumstances, may be 
submitted as an alternative to elevating 
buildings to or above the Base Flood 
Elevation. 
General Property Form. See Standard 
Flood Insurance PolicyGeneral Property 
Form. 
Government-Sponsored Enterprises 
(GSEs) for Housing. The privately owned 
corpo-rations that are federally chartered to 
support residential housing by providing a 
secondary market for mortgages. These 
include: 
 The Federal Home Loan Mortgage 
Corporation (FHLMC), Freddie Mac 
 The Federal National Mortgage Association (FNMA), Fannie Mae. 
Glossary GLS 6 

Grandfathering. An exemption based on 
circumstances previously existing. Under 
the NFIP, buildings located in Emergency 
Program communities and Pre-FIRM 
buildings in the Regular Program are 
eligible for subsidized flood insurance rates. 
Post-FIRM buildings in the Regular 
Program built in compliance with the 
floodplain management regulations in effect 
at the start of construction will continue to 
have favorable rate treatment even though 
higher Base Flood Elevations or more 
restrictive, greater risk zone designations 
result from Flood Insurance Rate Map 
revisions. 
GSEs. See Government-Sponsored Enterprises for Housing. 
Improved Real Estate. Property on which a 
building is located. Under the NFIP, this 
means a walled and roofed building or a 
building in the course of construction that 
qualifies for insurance coverage. 
Increased Cost of Compliance (ICC) 
Coverage. Coverage under the Standard 
Flood Insurance Policy for expenses that a 
property owner must incur, above and 
beyond the cost to repair the physical 
damage the building actually sustained from 
a flooding event, to comply with mitigation 
requirements of State or local floodplain 
management ordinances or laws. Acceptable 
mitigation measures are elevation, flood-
proofing, relocation, demolition, or any 
combination thereof. 
Letter of Determination Review (LODR). 
FEMAs ruling on the determination made 
by a lender or third party that a borrowers 
building is in a Special Flood Hazard Area 
(SFHA). A LODR deals only with the 
location of a building relative to the SFHA 
boundary shown on the Flood Insurance 
Rate Map. 
Letter of Map Amendment (LOMA). An 
amendment to the currently effective FEMA 
map which establishes that a property is not 
located in a Special Flood Hazard Area. A 
LOMA is issued only by FEMA. 
Letter of Map Change (LOMC). Any of 
several FEMA-issued letters that effect a 
change to a Flood Insurance Rate Map or to 
the flood zone and rating status of an 
insured building. LOMCs include the Letter 
of Map Amendment, the Letter of Map 
Revision, and the Letter of Map Revision 
Based on Fill. 
Letter of Map Change Subscription 
Service. A service through which the FEMA 
Map Service Center sells regular updates of 
all LOMAs and LOMRs. 
Letter of Map Revision (LOMR). An 
official amendment to the currently effective 
FEMA map. It is issued by FEMA and 
changes flood zones, delineations, and 
elevations. 
Letter of Map Revision Based on Fill 
(LOMR-F). An official amendment to the 
currently effective FEMA map. It is issued 
by FEMA and provides FEMAs determination concerning whether a building has 
been elevated on fill above the Base Flood 
Elevation and excluded from the Special 
Flood Hazard Area. 
Loan Portfolio. A collection of loans held 
for servicing or investment. 
LODR. See Letter of Determination Review. 
LOMA. See Letter of Map Amendment. 
LOMR. See Letter of Map Revision. 
LOMR-F. See Letter of Map Revision 
Based on Fill. 
Mandatory Purchase. A provision of the 
Flood Disaster Protection Act of 1973, 
whereby individuals, businesses, and others 
buying, building, or improving property 
located or to be located in identified areas of 
GLS 7 Glossary 

special flood hazards within NFIP 
participating communities are required to 
purchase flood insurance as a prerequisite 
for receiving any type of direct or indirect 
Federal financial assistance (e.g., any loan, 
grant, guaranty, insurance, payment, 
subsidy, or disaster assistance) when the 
building or personal property is the subject 
of or security for such assistance. 
Manufactured (Mobile) Home. A structure 
built on a permanent chassis, transported to 
its site in one or more sections, and affixed 
to a permanent foundation. Manufactured 
(mobile) home does not include recreational vehicles. 
Map Amendment. A change to an effective 
FEMA map that results in the exclusion 
from the Special Flood Hazard Area (SFHA) 
of an individual structure or a legally 
described parcel of land that has been 
inadvertently included in the SFHA (i.e., no 
alterations of topography have occurred 
since the date of the first FEMA map that 
showed the structure or parcel to be within 
the SFHA). 
Map Panel Number. Four-digit number 
followed by a letter suffix assigned by 
FEMA on a flood map. The first four digits 
represent the map panel, and the letter suffix 
represents the number of times the map 
panel has been revised. 
Map Revision. A change in the Flood 
Hazard Boundary Map or Flood Insurance 
Rate Map for a community which reflects 
revised zone, base flood, or other 
information. 
Map Zone. See Flood Zone. 
Mobile Home. See Manufactured (Mobile) 
Home. 
Mortgage Portfolio Protection Program 
(MPPP). A program designed to help 
lending institutions maintain compliance 
with the Flood Disaster Protection Act of 
1973, as amended. Policies written under the 
MPPP can be placed only through a Write 
Your Own Company. 
National Credit Union Administration 
(NCUA). The Federal agency that regulates 
federally insured credit unions. 
National Flood Insurance Program 
(NFIP). The program of flood insurance 
coverage and floodplain management 
administered under the Act and applicable 
Federal regulations promulgated in Title 44 
of the Code of Federal Regulations, 
Subchapter B. 
NFIP Bureau and Statistical Agent. A 
corporation, partnership, association, or any 
other organized entity that contracts with 
FEMA to be the focal point of support 
operations for the NFIP. 
NFIP Servicing Agent. A corporation, 
partnership, association, or any other 
organized entity that contracts with FEMA 
to service insurance policies as direct 
business. 
Non-Participating Community. A community in which the sale of flood insurance 
under the NFIP is not authorized because the 
community chooses not to participate in the 
Program. 
Non-Residential Buildings. A category of 
buildings, insurable by the NFIP under the 
General Property Form, that includes, but is 
not limited to: small business concerns; 
churches; schools; farm buildings (including 
grain bins and silos); poolhouses; clubhouses; 
recreational buildings; mercantile structures; 
agricultural and industrial structures; 
warehouses; hotels and motels with normal 
room rentals for less than 6 months 
duration; and nursing homes. See also Other 
Residential Buildings. 
Glossary GLS 8 

Office of the Comptroller of the Currency 
(OCC). The organization within the 
Department of the Treasury that regulates 
national banks. 
Office of Thrift Supervision (OTS). The 
organization with the Department of the 
Treasury that regulates Federal and state 
savings associations, savings banks, their 
wholly-owned subsidiaries, and savings and 
loan holding companies. 
100-Year Flood. A flood that has a 1-percent 
or greater chance of being equaled or exceeded in any given year. Any flood zone 
that begins with the letter A or V is subject 
to the 100-year flood. These high-risk zones 
are also known as Special Flood Hazard 
Areas (SFHAs). Over the life of a 30-year 
mortgage, there is a 26-percent chance that a 
building in an SFHA will experience such a 
flood. 
Other Residential Buildings. A category of 
buildings, insurable by the NFIP under the 
General Property Form, that includes, but is 
not limited to: hotels and motels where the 
normal occupancy of a guest is 6 months or 
more; tourist homes and rooming houses 
that have more than four roomers; and 
residential buildings (excluding hotels and 
motels with normal room rentals for less 
than 6 months duration) containing more 
than four dwelling units. See also Non-
Residential Buildings. 
Participating Community. A community 
for which FEMA has authorized the sale of 
flood insurance under the NFIP. 
Physical Map Revision (PMR). An official 
republication of an NFIP map to show 
changes to floodplain and/or floodway 
boundary delineations, Base Flood Elevations, and planimetric features. 
Policy. The entire written contract between 
the insured and the insurer. It includes: 
 The printed policy form; 
 The application and Declarations Page; 
 Any endorsement(s) that may be issued; 
and 
 Any renewal certificate indicating that 
coverage has been instituted for a new 
policy and new policy term. 
Only one dwelling, specifically described by 
the prospective policyholder in the 
application, may be insured under a policy. 
Post-FIRM Building. A building for which 
construction or substantial improvement 
occurred after December 31, 1974, or on or 
after the effective date of an initial Flood 
Insurance Rate Map (FIRM), whichever is 
later. 
Preferred Risk Policy (PRP). A policy that 
offers fixed combinations of building/ 
contents coverage or contents-only coverage 
at modest, fixed premiums. The PRP is 
available for property located in B, C, and X 
Zones in Regular Program communities that 
meets eligibility requirements based on the 
propertys flood loss history. 
Pre-FIRM Building. A building for which 
construction or substantial improvement 
occurred on or before December 31, 1974, 
or before the effective date of an initial 
Flood Insurance Rate Map (FIRM). 
Probation. A FEMA-imposed change in a 
communitys status resulting from violations 
and deficiencies in the administration and 
enforcement of NFIP local floodplain 
management regulations. 
Probation Surcharge (Premium). A flat 
charge that the policyholder must pay on 
each new or renewal policy issued covering 
property in a community that the NFIP has 
placed on probation under the provisions of 
44 CFR 59.24. 
GLS 9 Glossary 

Real Estate Settlement Procedures Act 
(RESPA) of 1974. A Federal law that 
prescribes rules concerning payment and 
disclosure of settlement service charges. 
Under implementing Regulation Z, the 
Department of Housing and Urban 
Development included as a settlement 
service the provision of services involving 
hazard, flood, or other casualty insurance. 
Recreational Vehicle. A vehicle that is (1) 
built on a single chassis, (2) 400 square feet 
or less when measured at the largest 
horizontal projections, (3) designed to be 
self-propelled or permanently towable by a 
light-duty truck, and (4) designed primarily 
not for use as a permanent dwelling but as 
temporary living quarters for recreational, 
camping, travel, or seasonal use including, 
but not limited to, travel trailers, trailers on 
wheels, park trailers, and other similar 
vehicles. 
Regular Program. The final phase of a 
communitys participation in the NFIP. In 
this phase, a Flood Insurance Rate Map is in 
effect and full limits of coverage are 
available under the Act. 
Regular Program Community. A community wherein a Flood Insurance Rate Map 
is in effect and full limits of coverage are 
available under the Act. 
Regulatory Floodway. The channel of a 
river or other watercourse and the adjacent 
land areas that must be reserved in order to 
discharge the base flood without cumulatively increasing the water surface 
elevation more than a designated height. 
Remapping. Scheduled revisions of 
community flood maps to take into 
consideration natural changes within the 
floodplain and regulatory floodways and to 
allow for changes as a result of land use and 
development, land contour changes, and 
new information gained from advanced 
technology. Every 6 months, FEMA 
publishes the results of its remapping efforts 
in a compendium of flood map changes in 
the Federal Register. 
Repetitive Loss Structure. An NFIP-insured 
structure that has had at least two paid flood 
losses of more than $1,000 each in any 
10-year period since 1978. 
Replacement Cost Value (RCV). The cost 
to replace property with the same kind of 
material and construction without deduction 
for depreciation. 
Residential Condominium Building. A 
building, owned and administered as a 
condominium, containing one or more 
family units and in which at least 75 percent 
of the floor area is residential. 
Residential Condominium Building Association Policy (RCBAP). See Standard 
Flood Insurance PolicyResidential Condominium Building Association Policy 
(RCBAP). 
Residential Improved Real Estate. 
Improved real estate for which the 
improvement is a residential building. 
Section 1316. A section of the National 
Flood Insurance Act of 1968, as amended, 
which states that no new flood insurance 
coverage shall be provided for any property 
FEMA finds has been declared by a duly 
constituted State or local zoning authority or 
other authorized public body to be in 
violation of State or local laws, regulations, 
or ordinances that are intended to discourage 
or otherwise restrict land development or 
occupancy in flood-prone areas. 
Servicer. The entity responsible for 
receiving scheduled, periodic payments 
from a borrower under the terms of a loan, 
including principal, interest, and any other 
payments as may be required under the 
terms of the loan. The servicer may also be 
the lender. 
Glossary GLS 10 

SFHA. See Special Flood Hazard Area. 
Small Loan. Any loan having an original 
principal balance of $5,000 or less and a 
repayment term of 1 year or less and, thus, 
exempt from Federal requirements for the 
mandatory purchase of flood insurance. 
Special Flood Hazard Area (SFHA). An 
area having special flood, mudflow, or 
flood-related erosion hazards, and shown on 
a Flood Hazard Boundary Map or Flood 
Insurance Rate Map as Zone A, AO, 
A1-A30, AE, A99, AH, AR, AR/A, AR/AE, 
AR/AH, AR/AO, AR/A1-A30, V1-V30, 
VE, or V. For the purpose of determining 
Community Rating System premium 
discounts, all AR and A99 zones are treated 
as non-SFHAs. 
Stafford Act. A Federal law that precludes 
further disaster relief benefits on property 
where the owners have not obtained and 
maintained the required flood insurance 
coverage after receiving Federal assistance 
for repairs to property damaged by initial 
flooding. 
Standard Flood Hazard Determination 
Form (SFHDF). FEMA Form 81-93, which 
is to be used in either printed, computerized, 
or electronic form by all companies 
performing flood zone determinations,. A 
completed SFHDF is required in most loan 
files and is the primary product of flood 
zone determination companies. 
Standard Flood Insurance Policy 
Dwelling Form. Policy issued to insure a 
building and/or residential contents on a single-
family or a two- to four-family dwelling. 
Standard Flood Insurance Policy 
General Property Form. Policy issued to 
insure a building and/or contents on other 
residential or non-residential buildings. See 
also Other Residential Buildings and Non-
Residential Buildings. 
Standard Flood Insurance Policy 
Residential Condominium Building Association Policy (RCBAP). Policy issued to 
insure a residential condominium building 
and all units within the building, provided 
that the building is located in a Regular 
Program community and at least 75 percent 
of the total floor area is residential. 
State-Owned Property. Property that does 
not require flood insurance if it is covered 
under a State policy of self-insurance 
satisfactory to the Administrator of FEMA. 
Structure. See Building. 
Suspension. FEMAs removal of an NFIP 
participating community from the Program 
because the community has not enacted 
and/or enforced the proper floodplain 
management regulations required for 
participation. 
Table Funding. Typically, a loan transaction where the party providing the funding 
ordinarily reviews and approves the credit 
standing of the borrower and issues a 
commitment to the broker to purchase the 
loan at the time the loan is originated. 
Tentative Rates. Unpublished NFIP rates 
used to issue policies for applications that 
fail to provide valid actuarial rating 
information. 
Third-Party Flood Zone Determination 
Companies. Vendors that, for a fee, 
determine the flood zone classification of a 
property. If a lender/servicer uses one of 
these companies for flood zone 
determinations, the results must be guaranteed 
for accuracy. See also Flood Zone 
Determination Vendor. 
Timeshares. Property interests that 
generally fall into one of two categories, 
either (1) fee or real estate ownership, or (2) 
non-fee interest, such as the right to use. A 
timeshare building organized on a fee 
simple basis is eligible for the Residential 
Condo-minium Building Association Policy. 
GLS 11 Glossary 

A timeshare not organized on a fee simple 
basis can obtain the General Property Form. 
Different policy coverages apply according 
to property interest. 
Tripwire. An action that alerts lenders and 
servicers to comply with flood insurance 
purchase requirements in the case of the 
making, increasing, extending, or renewing 
of a loan, or the transfer of a loan to a 
Government-Sponsored Enterprise for 
Housing. 
Waiting Period. The time between the date 
of application and the policy effective date. 
Write Your Own (WYO) Program. A 
cooperative undertaking of the insurance 
industry and FEMA begun in October 1983. 
The WYO Program operates within the 
context of the NFIP and involves private 
insurance carriers that issue and service 
NFIP policies under their own names. 
WYO Vendor. An organization employed 
by certain Write Your Own (WYO) carriers 
to conduct support operations to procure, 
produce, and handle NFIP claims on behalf 
of the insurer. 
Zone. See Flood Zone. 
Glossary GLS 12 

INDEX 
A 
Abundance of caution............................ 23 
Acquisition of lending institution by another 
................................................................ 36 
Act.......................................................GLS 1 
Actual cash value (ACV) ........28, 47, GLS 1 
Administrator of FEMA......................GLS 1 
Agent...................................................GLS 1 
Agricultural lending .................................. 30 
Application..........................................GLS 1 
Assignment of policy ....................39, GLS 1 
B 
Base flood .....................................10, GLS 1 
Base Flood Elevation (BFE) .....9, 13, GLS 1 
Binder/certificate of insurance prohibited .... 
..........................................................GLS 1 
Blanket insurance prohibited ..............GLS 1 
Broker, mortgage .................................56-57 
Building, eligible............................. GLS 1-2 
in the course of construction.........30-31, 
GLS 2 
in violation of State or local laws....... 22, 
GLS 10 
ineligible.........................................20-22 
location...........................................11-12 
Post-FIRM...............................29, GLS 9 
Pre-FIRM ................................29, GLS 9 
Bureau and Statistical Agent, NFIP..8, GLS 8 
C 
Calculating insurance coverage ...........27-28 
Cancellation of policy .........................GLS 2 
Chattel mortgage ...........................31, GLS 2 
Civil liability ............................................. 60 
Civil money penalties.............. 59-60, GLS 2 
Coastal barrier.....................................GLS 2 
Coastal Barrier Improvement Act (CBIA) 
of 1990 ................................. 21-22, GLS 2 
Coastal Barrier Resources Act (CBRA) 
of 1982 ................................. 21-22, GLS 2 
Coastal Barrier Resources System (CBRS) .. 
.............................................. 21-22, GLS 2 
CBRS Areas and Otherwise Protected Areas 
(OPAs) ..............................................21-22 
Coastal high hazard areas....................GLS 2 
Code of Federal Regulations (CFR) ...GLS 2 
Coinsurance, Residential Condominium 
Build-ing Association Policy (RCBAP)47-48, 
GLS 2 
Commercial loan........................................40 
Community .................................2, 9, GLS 2 
Community floodplain management ordi- 
nances........................................................9 
Community, NFIP non-participating .. 19-22, 
GLS 8 
Community, NFIP participating............. 9-19 
Community number ............................GLS 2 
Community Rating System (CRS)..............9, 
GLS 2-3 
Community Status Book .............................10 
Community-initiated map revision ............18 
Compendium of flood map changes, FEMA ... 
....................................................19, GLS 3 
Condominium ..........................45-50, GLS 3 
Condominium association.......30, 45, GLS 3 
Conforming loan.................................GLS 3 
Contents (personal property) coverage.......... 
.................................................... 31-32, 49 
Conventional loan (in non-participating 
community) ...............19-20, 22, 55, GLS 3 
Cooperative...................................50, GLS 3 
Cooperative association................50, GLS 3 
Coverage availability ............................. 9-22 
Coverage obtained in conjunction with a loan 
........................................................... 38-39 
Covered loan ..............................................25 
D 
Declarations page................................GLS 3 
Deductible.........................25, 29, 51, GLS 3 
Deductible buyback ............................GLS 3 
Department of Agriculture (USDA) ..........26 
Department of Veterans Affairs (VA) .......26 
Depreciation..................................28, GLS 4 
Designated loan............................4-5, GLS 4 
Determination of flood zone... See Flood zone 
 determination 
Direct Program, NFIP ..................................8 
Direct Program Servicing Agent, NFIP.......8 
Director...............................................GLS 4 
IND 1 Index 

Disaster assistance, Federal ...... 7, 20, 34-35, 
App. 4 
Duplication of NFIP policies prohibited....47 
Dwelling Form .............. See Standard Flood 
Insurance PolicyDwelling Form 
E 
Effective date of NFIP coverage................38 
Elevated building................................GLS 4 
Elevation Certificate ................30-31, GLS 4 
Eligible building ..............................GLS 1-2 
Eligible community......................................2 
Emergency Program......................10, GLS 4 
Escrowing of flood insurance premiums 
(requirements and exclusions) ... 31, 39-40, 
GLS 4 
Evidence/proof of insurance coverage......26, 
33, 46-47, GLS 4 
Examinations, regulatory ..................... 58-59 
Exemptions from mandatory purchase 
require-ment ................................ 33, 42-43 
Expense Constant................................GLS 4 
Expiration/Renewal Notice.......... 36, App. 4 
F 
Fannie Mae ............ 25-26, 51, 53-55, GLS 5 
Farm Credit Administration (FCA) ..........24, 
GLS 4 
Federal agency lenders..............4, 26, GLS 4 
Federal Deposit Insurance Corporation 
(FDIC) 
....................................24, App. 2, GLS 4-5 
Federal disaster assistance ........ 7, 20, 34-35, 
App.4 
Federal Emergency Management Agency 
(FEMA)....................................1, 8, GLS 5 
FEMA Map Assistance Center ............18 
FEMA Map Service Center ........... 18-19 
Federal Financial Institutions Examination 
Council (FFIEC) .....................................24 
Federal Home Loan Mortgage Corporation 
(FHLMC) .........................See Freddie Mac 
Federal Housing Administration (FHA) ....26 
Federal Insurance Administrator ........GLS 5 
Federal lending regulatory agencies ..........24 
Federal National Mortgage Association 
(FNMA) ............................See Fannie Mae 
Federal Policy Fee ..............................GLS 5 
Federal Register .................................GLS 5 
Federal Reserve System (FRS), Board of 
Governors of ...........................................24 
Federally regulated lenders/lending institutions.......................................23-25, GLS 5 
Fees, FEMA map-change related ....14, 15, 55 
Fees, lenders flood zone determination ........ 
......................................................... 13-14 
FFIEC ...... See Federal Financial Institutions 
Examination Council 
FHA .... See Federal Housing Administration 
FHBM...... See Flood Hazard Boundary Map 
Finance charge..................................... 13-14 
Financial Assistance/Subsidy Arrangement, 
Write Your Own (WYO) ................. GLS 5 
FIRM.............See Flood Insurance Rate Map 
500-year flood..................................... GLS 5 
Flood...................................................GLS 5 
Flood Disaster Protection Act of 1973 .... 2-3 
Flood Hazard Boundary Map (FHBM) ....10, 
GLS 6 
Flood hazard mitigation...............................2 
Flood Insurance Manual .................... GLS 6 
Flood Insurance Rate Map (FIRM) ............2, 
9-13, GLS 6 
Flood insurance resources for lenders .. App. 5 
Flood map .......................................... 2, 9-13 
Flood Map Modernization (Map Mod)..11 
Flood Map Status Information Service.....GLS 6 
Flood zone ..................... 9-13, 36-38, GLS 6 
Flood zone determination ......... 11-14, 37-38 
Contested determination ......................38 
Discrepancies in determination .....12, 14 
FEMA review of determination.... 11-17, 
38, GLS 4 
Grandfathering of flood map zone .... 12-13, 
GLS 7 
Lender determination fee............... 13-14 
Lender responsibilities........ 11-12, 37-38 
Location of building ...................... 11-12 
Previous determination, use of ...12, 37-38 
Third-party determination 
company/vendor (and guarantee of 
accuracy).................................... 11-12, 
37, 55, GLS 6, GLS 11 
Floodplain...........................................GLS 6 
Floodplain management.............. 2, 9, GLS 6 
Floodproofing ................................. 9, GLS 6 
Floodproofing Certificate ................... GLS 6 
Force placement................................... 40-42 
Freddie Mac........... 25-26, 51, 53-55, GLS 5 
Index IND 2 

G 
General Property Form... See Standard Flood 
Insurance PolicyGeneral Property Form
Government-Sponsored Enterprises (GSEs) 
for Housing ........ 25-26, 51, 53-55, GLS 6 
Grandfathering of flood map zone......12-13, 
GLS 6-7 
GSEs..................See Government-Sponsored 
Enterprises (GSEs) for Housing 
Guarantee of third-party flood zone deter
miner ...........................................11-12, 37 
H 
High-value land with low-value building .....
 ...........................................................29-30 
Home equity mortgage.........................32-33 
Homeowners association......................50-51 
HUD Good Faith Estimate........................ 14 
HUD-1 Settlement Statement.................... 14 
I 
Improved real estate ................... 1-2, GLS 7 
Improved real property................................ 2 
Increased Cost of Compliance (ICC) coverage 
.............................................. 28-29, GLS 7 
Ineligible building................................20-22 
Initial purchase provision.....................38-39 
Insurance coverage available under NFIP........ 
....................................................26-29, 47 
Insurance coverage, calculation of.......27-28 
Insurance coverage required by law......... 27, 
32, 46 
Insurance to full value recommended ...... 46, 
47, 48 
Inventory ................................................... 32 
L 
Land loan not insurable............................. 29 
Land not insurable..................................... 27 
Legal references ................................. App. 1 
Lender flood insurance resources ...... App. 5 
Lender regulations, FDIC .................. App. 2 
Lender responsibilities.............................5-7 
Lending agency regulations ........................ 4 
Lending entities subject to mandatory pur- 
chase requirements................................3-4 
Lending subsidiaries and syndicates......... 24 
Letter of Determination Review (LODR)...... 
...............................................14-17, GLS 7 
FEMAs response to requests ..............16 
Supporting materials for requests ........16 
Letter of Map Amendment (LOMA) ........17, 
GLS 7 
Letter of Map Change (LOMC)..........14-19, 
GLS 7 
Letter of Map Change Subscription Service.... 
..........................................................GLS 7 
Letter of Map Revision (LOMR)........17-18, 
GLS 7 
Letter of Map Revision Based on Fill 
(LOMR-F).............................17-18, GLS 7 
Levees .................................................. 10-11 
Lien/lienholder, primary and secondary ........ 
................................................32-33, 37-38 
Life-of-loan insurance coverage ..................5 
(Life-of-loan) map monitoring service .....12, 
13-14, 55, GLS 6 
Limits of coverage, NFIP......... 26, 28-29, 47 
Line of credit..............................................33 
Loan activity as mandatory purchase tripwire ................................................. 4-5, 53 
Loan closing/origination...........................5,6 
Loan portfolio .....................................GLS 7 
Review of.......................................55-56 
Safety and soundness of.......................56 
Loan servicer.............. 35-36, 57, GLS 10-11 
Loan transfer or purchase ....................53, 55 
Location of building............................. 11-12 
LODR...See Letter of Determination Review 
LOMA.......... See Letter of Map Amendment 
LOMC................. See Letter of Map Change 
LOMR............... See Letter of Map Revision 
LOMR-F ........... See Letter of Map Revision 
Based on Fill 
Loss assessment ............................. 48, 49-50 
Loss settlement .............................. 28-29, 48 
Loss settlement formula, Residential Condo
minium Building Association Policy......48 
Low-value building on high-value land.29-30 
M 
Mandatory purchase requirements..........2-7, 
App. 1, GLS 7-8 
Manufactured (mobile) home ........... 1-2, 31, 
GLS 8 
Map amendment..................................GLS 8 
Map Assistance Center, FEMA .................18 
IND 3 Index 

Map availability ................................... 18-19 
Map change subscription service...............19 
Map changes, compendium of ...................19 
Map monitoring service...12, 13-14, 55, GLS 6 
Map panel number ..............................GLS 8 
Map revision.................................18, GLS 8 
Map Service Center, FEMA .........19, App. 5 
Map zone............................... See Flood zone 
Merger of lending institutions....................36 
Mitigation of flood hazards..........................2 
Mobile home ......See Manufactured (mobile) 
 home 
Mortgage broker .................................. 46-47 
Mortgage Portfolio Protection Program 
(MPPP).......................... 42, App. 7, GLS 8 
Mortgage/mortgagee, first and second........... 
 ................................................32-33, 37-38 
N 
National Credit Union Administration 
(NCUA)......................................24, GLS 8 
National Flood Insurance Act of 1968.... 1-2, 
App. 1 
National Flood Insurance Program (NFIP).... 
.....................1, 7-8, App. 1, App. 5, GLS 8 
NFIP Bureau and Statistical Agent...8, GLS 8 
NFIP Direct Program ...................................8 
NFIP non-participating community .... 19-22, 
GLS 8 
NFIP participating community....9-19, GLS 9 
NFIP Servicing Agent.....................8, GLS 8 
NFIP Write Your Own (WYO) Program.....8 
National Flood Insurance Reform Act of 
1994............................................3-7, 23-26 
Designated loan.................................. 4-5 
Lender responsibilities.......................5-7 
Lending entities subject to......3-4, 23-26 
Loan servicer responsibilities ..............57 
New construction ................................. 30-31 
Noncompliance penalties.....................59-60 
Non-participating community.............19-22, 
GLS 8 
Non-residential building.....................GLS 8 
Notification requirements... 20, 34-36, App. 4 
Expiration/Renewal Notice.....36, App. 4 
Notice of Special Flood Hazard and 
Availability of Federal Disaster Relief 
Assistance ...................... 34-35, App. 4 
Notification of Change of Servicer.... 35-36, 
App. 4 
O 
Office of the Comptroller of the Currency 
(OCC) ........................................ 24, GLS 9 
Office of Thrift Supervision (OTS)...........24, 
GLS 9 
100-year flood..................................... GLS 9 
Other Residential Building ................. GLS 9 
Otherwise Protected Areas (OPAs) and 
Coastal Barrier Resources System (CBRS) 
Areas ................................................ 21-22 
P 
Participating community............9-19, GLS 9 
Pattern . . . of violations....................... 59-60 
Penalties, regulatory ............................ 59-60 
Personal property (contents) coverage............. 
.................................................... 31-32, 49 
Physical map revision.........................GLS 9 
Policy .................................................. GLS 9 
Portfolio review, loan .......................... 55-56 
Post-FIRM building......................29, GLS 9 
Preferred Risk Policy (PRP) ... 18, 29, GLS 9 
Pre-FIRM building ....................... 29, GLS 9 
Previous determination, use of ............ 37-38 
Private flood insurance .................. 42, 57-58 
FEMA criteria for evaluation of ..........58 
Probation, NFIP community...........9, GLS 9 
Probation surcharge (premium) ...... 9, GLS 9 
Proof/evidence of insurance coverage......26, 
33, 46-47, GLS 4 
Property sold or transferred ................. 35-36 
R 
RCBAP ......... See Residential Condominium 
Building Association Policy 
Real Estate Settlement Procedures Act 
(RESPA) of 1974...............31, 39, GLS 10 
RESPA Notice of Transfer of Servicing 
form.........................................................35 
Recreational vehicle ................... 31, GLS 10 
Regular Program.........................10, GLS 10 
Regulated lenders/lending institutions.. 23-25, 
GLS 5 
Regulation Z ..........................13-14, GLS 10 
Regulatory agencies, Federal lending........24 
Regulatory examinations ..................... 58-59 
Regulatory floodway .................. 18, GLS 10 
Regulatory penalties ............................ 59-60 
Remapping..................................55, GLS 10 
Repetitive Loss Structure.................. GLS 10 
Index IND 4 

Replacement cost value (RCV).......... 27-28, Structure....................................See Building 
47-48, 49-50, GLS 10 Subscription service, map change..............19 
Residential Condominium Building...GLS 10 Subsidiaries of federally regulated lenders/ 
Residential Condominium Building lending institutions..................................24 
Association Policy (RCBAP)See Standard FloodSurcharge, probation, NFIP community .....9, 
Insurance PolicyResidential Condominium 
Building Association Policy (RCBAP) 
Residential Improved Real Estate.....GLS 10 
Resources for lenders, flood insurance ......... 
......................................................... App. 5 
RESPA ............... See Real Estate Settlement 
Procedures Act 
Restricted coverage areas.....................21-22 
S 
Safety and soundness of loan portfolio..... 56 
Sale or transfer of loan.........................35-36 
Second mortgage..................................32-33 
Secondary market................................ 25, 51 
Section 1316 properties not insurable...... 22, 
GLS 10 
Service corporations.................................. 24 
Servicer, loan ........................ 57, GLS 10-11 
Servicing Agent, NFIP....................8, GLS 8 
SFHA........... See Special Flood Hazard Area 
SFHDF ...............See Standard Flood Hazard 
Determination Form 
Small Business Administration (SBA) ..... 26 
Small loan exemption............33, 43, GLS 11 
Special Flood Hazard Area (SFHA) .......2-3, 
9-13, 36-38, 53-56, GLS 11 
Stafford Disaster Relief and Emergency 
Assis-tance Act, Robert T. .......20, GLS 11 
Standard Flood Hazard Determination Form 
(SFHDF).................36-38, App. 3, GLS 11 
Standard Flood Insurance Policy .............. 42 
Dwelling Form .... 28, 45, 48-50, GLS 11 
General Property Form..... 28, 45, 50, 51, 
GLS 11 
Residential Condominium Building Asso- 
ciation Policy (RCBAP).......28, 45-48, 
GLS 11 
State-owned property exemption..42, GLS 11 
 GLS 9 
Suspension, NFIP community ......9, GLS 11 
T 
Table funding.........................56-57, GLS 11 
Tentative rates, NFIP........................GLS 11 
Timeshare building ................50, GLS 11-12 
Transfer or purchase of loan .... 35-36, 53, 55 
Travel trailer ..............................................31 
Tripwires for mandatory purchase..........4-5, 
53-56, GLS 12 
Truth in Lending Act ........................... 13-14 
U 
Underinsured building ............. 32, 48, 49-50 
Underwriting restrictions ..................... 20-21 
Unit owners building coverage, condo
minium .............................................. 48-49 
Unit owners personal property coverage, 
condominium ..........................................49 
V 
Valuation of condominium building..........47 
Violations, pattern . . . of ..................... 59-60 
W 
Waiting period for NFIP coverage, 30-day ... 
..........................38-39, 45, App. 6, GLS 12 
Effective date of coverage ......38, App. 6 
Exception for assignment of policy .....39 
Exception for initial purchase........38-39 
45-day purchase deadline.....................41 
Wholesale mortgage lending................ 56-57 
Write Your Own (WYO) Company/Program.. 
.................................................7-8, GLS 12 
WYO vendor.....................................GLS 12 
Z 
Zone ...................................... See Flood zone 
IND 5 Index