U.S. Department of Housing and Urban Development | Office of Policy Development and Research

Flood Insurance Coverage of 

Federal Housing Administration 

Single-Family Homes
Multidisciplinary Research Team: Task Order 7 

Flood Insurance Coverage of Federal Housing 

Administration Single-Family Homes

March 30, 2020 

Prepared by:

2M Research
ACKNOWLEDGMENTS

Several individuals contributed to the successful completion of this research. Ransford Osafo-Danso of 

the U.S. Department of Housing and Urban Development’s (HUD) Office of Policy Development & 

Research (PD&R) served as our contracting officer’s representative. Dr. Osafo-Danso helped ensure that 

our work proceeded in a timely fashion, facilitated our communication with subject matter experts 

(SMEs) at HUD, and generally helped guide the development of this study. SMEs at HUD PD&R—Mr. 

Christopher Narducci, Ms. Katrina Durbak, and Dr. Maria Chelo De Venecia—provided timely feedback 

and guidance to help the study team understand relevant issues and refine our research. Dr. Kevin Park 

at HUD PD&R also provided helpful background on the Federal Housing Administration single-family 

property database. Within the 2M Research (2M) study team, Dr. Jim Murdoch served as project 

director; Dr. Dennis Kwadwo Okyere was project manager; and Dr. James Murdoch, Dr. Meghna 

Brahmachari, and Dr. Arpita Chakravorty led the analysis and reporting. 2M’s research staff, including 

Shane Smith, Lan Hu, MacKenzie Regier, Cindy Romero, and Joshua Townley provided invaluable 

support throughout the study and assisted in the preparation of the final document. The analysis was 

made possible only with National Flood Insurance Program policy data made available by the Federal 

Insurance and Mitigation Administration within the Federal Emergency Management Agency (FEMA) 

under an interagency sharing and access agreement. Mr. Joshua King, an operations research analyst at 

FIMA was instrumental in orchestrating the agreement and advising HUD and 2M on the data structure. 

Disclaimer 

The contents of this report are the views of the contractor and do not necessarily reflect the views or 

policies of the U.S. Department of Housing and Urban Development or the U.S. Government.
Flood Insurance Coverage of Federal Housing Administration Single-Family Homes | i

FOREWORD

As the extent and costs of flood damage increase throughout the United States, the U.S. Department of 

Housing and Urban Development (HUD) is developing analytical tools to better understand the risk of 

flood hazard to Federal Housing Administration (FHA) homeowners and the collateral securing their 

home loan and mortgage insurance. HUD’s 2018–2022 Strategic Plan directs the Department to 

“support sustainable homeownership and financial viability,” which includes responsibly balancing the 

HUD role to support homeowners while safeguarding the American taxpayer, and ensuring its insurance 

requirements and premiums do not encourage excessive risk-taking. HUD is, therefore, gathering data 

and conducting new analyses to learn about the exposure of home loan collateral to hazard risks—

especially flood risk—and prepare for the underlying liabilities. 

One of HUD’s largest potential liabilities is the mortgages insured through FHA, which includes over 

$1.26 trillion in mortgage debt on 8 million homes. To prudently manage this large asset class, HUD 

needs information about the portfolio’s flood risk exposure and the extent to which FHA homeowners 

are required to carry requisite flood insurance policies provided by the National Flood Insurance 

Program (NFIP). Despite conducting an initial check of a property’s flood risk and flood insurance status, 

HUD does not electronically document compliance with this requirement and is unable to monitor it in 

real time. 

Through a unique arrangement with NFIP, HUD gained access to a database of property-level flood 

insurance policies and damage claims for the past decade in North Carolina and Florida. This data 

enabled researchers to link FHA-insured mortgages with flood insurance policies and damage claims for 

the first time and provided insight into the level of compliance with the flood insurance mandate 

relative to flood risk exposure in these two states. The data also enabled researchers to begin examining 

potential causal relationships between flood damage and mortgage delinquency. 

Though the analysis is limited to just two states, several findings emerged that warrant further 

investigation and development of new analytical tools. The first finding is that this portfolio is very 

exposed to flood risk, yet many homeowners that are at risk are not covered by adequate flood 

insurance—even when it is required. In both states, over one-half of the FHA-insured mortgages in these 

states are located within or very close to a high-risk flood zone, yet less than one-fifth of such homes 

have insurance, and only about one-half of homes required to have insurance are in compliance. Initial 

examination of the data shows that flood insurance damage claims are associated with a higher 

likelihood of subsequent mortgage default. Though the finding is preliminary, it aligns with findings in 

other studies and portends a serious systemic risk to the portfolio in the context of increasing flood 

events, nationally. Overall, the analysis demonstrated most clearly that HUD needs more detailed data 

to regularly conduct audits of compliance with the flood insurance requirement. FHA conducts random 

monitoring of compliance on individual properties but does not have access to the digital data needed 

to routinely conduct analysis across its entire stock or carry out follow-up examinations of the research 

presented here. 

This analysis was intended as an initial step towards demonstrating the value of detailed data on the 

flood risk exposure of FHA-insured mortgages and compliance with the insurance mandate. The findings 

from two states demonstrate the need to conduct additional analysis on a broader scope to answer 

critical questions. What is the national rate of compliance with the flood insurance mandate? What is 
Flood Insurance Coverage of Federal Housing Administration Single-Family Homes | ii

the dollar value of HUD liability that is not protected by hazard insurance? Moreover, further 

investigation of links between flood insurance claims and premium rate changes with mortgage 

performance is vital to understanding HUD exposure to systemic losses in the context of heightened 

regional and national flood risk. Answers to such questions are necessary for HUD to adequately limit, 

manage, and price its liabilities. With this report and pending efforts to improve data quality, HUD is 

moving in the direction of securing the integrity of a fundamentally important, but potentially fragile, 

mortgage insurance program and holding true to its stated mission of sustaining homeownership and 

viability for American homeowners and all those striving to become one.

While not the guiding purpose of the study, I would be remiss if I did not mention HUD’s effort to revise 

FHA regulations to allow FHA homebuyers in Special Flood Hazard Areas (SFHAs) the option to meet the 

mandatory flood insurance requirement with the purchase of a private flood insurance policy (see RIN: 

2502-AJ43). HUD finalized this rule on November 10, 2020. This rule aligns FHA regulations and 

standards with the congressional intent of the Biggert-Waters Insurance Reform Act of 2012 requiring 

federally regulated lenders and the government-sponsored enterprises to accept private flood insurance 

as the satisfaction of the flood insurance requirement if the policies meet requirements for coverage 

and counter-party risk. Moreover, it is hoped that these changes will increase consumer choice and 

affordability of flood insurance for homebuyers while encouraging greater use of private flood 

insurance. These changes will also hopefully bring about an alternative to insulate potential FHA 

homebuyers from the costly impacts of delay or a canceled purchase should a temporary lapse in the 

NFIP’s authorization occur. 

Seth D. Appleton

Assistant Secretary for Policy Development and Research

U.S. Department of Housing and Urban Development
Flood Insurance Coverage of Federal Housing Administration Single-Family Homes | iii

TABLE OF CONTENTS

Executive Summary iv

Objectives of the Study .............................................................................................................................. iv

Background of the National Flood Insurance Program ................................................................................ iv

Research Approach ..................................................................................................................................... v

Key Findings................................................................................................................................................ v

Limitations and Further Work .................................................................................................................. viii

1 Introduction 1

Background of Study ................................................................................................................................... 1

Objectives of this Study............................................................................................................................... 4

Organization of this Report ......................................................................................................................... 5

2 Data Sources and Methodology 6

Data Sources............................................................................................................................................... 6

Approach to Research Objectives ..............................................................................................................10

3 Results 14

Extent of Flood Risk of Federal Housing Administration Single-Family Properties.......................................14

Extent of Federal Housing Administration Properties in Compliance with 

Requirement to Carry Flood Insurance ...............................................................................................18

Relationship Between National Flood Insurance Program Claims, Flood 

Insurance Premiums, and Federal Housing Administration Loan Performance ....................................27

4 Summary and Conclusions 40

Summary of the Findings...........................................................................................................................40

Limitations and Further Work ...................................................................................................................43

Appendix A: Details of the Data Merging Process 45

Appendix B: General Federal Emergency Management Agency Terms 47

References 56
Flood Insurance Coverage of Federal Housing Administration Single-Family Homes | iv

EXECUTIVE SUMMARY

Objectives of the Study

Currently, the premium-financed and taxpayer-guaranteed Federal Housing Administration (FHA) 

Mutual Mortgage Insurance fund within the U.S. Department of Housing and Urban Development (HUD) 

insures more than $1.26 trillion of mortgage debt on 8.12 million single-family homes. Because the fund 

can borrow from the U.S. Treasury if necessary, this portfolio is one of HUD’s largest potential liabilities. 

As part of its obligation to prudently manage this portfolio amid increasing flood and flood-related 

disaster risk, HUD seeks to develop better analytical information about its flood risk exposure. HUD 

contracted with 2M Research to better understand the flood risk exposure of FHA single-family homes 

and compliance with flood insurance requirements. The study has three research objectives:

1. Examine the number and proportion of homes located in Special Flood Hazard Areas (SFHAs) 

that have mortgages secured by FHA.

2. Using National Flood Insurance Program (NFIP) data, determine whether the FHA single-family 

home mortgages in SFHAs comply with the FHA requirement to carry flood insurance.

3. Explore the relationship between flood insurance coverage and premiums, claims against NFIP, 

and loan performance. 

Background of the National Flood Insurance Program

Flooding has become a recurrent natural hazard in the United States, with a significant percentage of 

the population vulnerable to the event (Kunreuther et al., 2019). In addition to floods being the most 

common natural disaster, they are also the most damaging, with 8 out of the 10 costliest catastrophes in 

the United States involving flooding (Karapiperis, 2017). Floods often cause enormous loss to life, 

property, and the environment. In the United States, floods and water-related events such as severe 

storms and hurricanes have resulted in more than $1 trillion in losses over the last four decades, as 

estimated by the National Oceanic and Atmospheric Administration.

Damage caused by flooding is not typically covered under a standard homeowner’s policy. Instead, flood 

damage is covered by a federally backed policy issued by NFIP, which is available to homeowners, 

renters, and small businesses (Karapiperis, 2017). Private insurers have not been historically able to 

provide flood insurance at affordable rates in the marketplace, because the cost of paying out claims for 

flood damage could not be offset by affordable premiums. Until the establishment of NFIP, the national 

response to flood disasters was generally limited to providing funds for flood control projects and 

disaster assistance for flood victims (Dixon et al., 2006). The catastrophic nature of flooding led to the 

decoupling of flood insurance coverage from homeowners’ insurance policies in the mid-20th century 

and a rise in the lack of affordable, stand-alone flood insurance policies. Given that many properties 

already existed in flood-prone areas, the federal government intervened to provide an insurance option 

for those homeowners, with the intention that (1) the designation of specified flood zones would serve 

as a way to inform buyers of the risks in those areas and that (2) the additional requirement to purchase 

flood insurance would discourage further development in those flood-prone areas. NFIP was created in 

1968 with these goals and has since evolved to take on additional roles that reduce risks, losses, and 

costs associated with flooding.
Flood Insurance Coverage of Federal Housing Administration Single-Family Homes | v

The Flood Disaster Protection Act of 1973,1 one of the key pieces of legislation governing NFIP, 

introduced the mandatory purchase provision. This law required the purchase of flood insurance as a 

condition for obtaining a mortgage loan from federally regulated lending institutions for properties in an 

SFHA and as a condition for obtaining federal assistance. Generally, the mandatory purchase 

requirement applies to three types of property owners with homes located in an SFHA of participating 

communities:

a) Those with a property loan issued by a federally regulated lender or a government-sponsored 

enterprise. 

b) Those with a mortgage backed by the federal government—such as FHA, the U.S. Department of 

Veterans Affairs, or the U.S. Department of Agriculture—or a mortgage that has been 

transferred to a federal agency—such as FHA.

c) Those who receive federal financial assistance for acquisition, construction, improvement, or 

disaster recovery of a property located in an SFHA (Shabman, Kousky, and Lingle, 2019; Dixon et 

al., 2006).

Research Approach

This study combined datasets from three main sources: HUD’s quarterly extracts of single-family FHA 

property database, the Federal Emergency Management Agency’s (FEMA) property-level NFIP database, 

and FEMA’s SFHA status. The study team also utilized parcel and building footprint data to better

understand how properties with FHA-insured mortgages overlap with SFHAs. We downloaded building 

footprint data on ArcGIS online for North Carolina provided by the North Carolina Floodplain Mapping 

Program (fris.nc.gov) and building footprint data for Florida provided by the Oak Ridge National 

Laboratory (ornl.gov).

Our analytical approach involved: first, estimating the number and proportion of FHA single-family home 

mortgages in FEMA’s SFHAs; second, determining whether the homes are in FEMA’s property-level NFIP 

database and whether they are covered by flood insurance; and third, generating this information by 

year from 2011 through 2019 and using this information to create a longitudinal database that allowed 

us to assess the relationship between loan performance, flood insurance coverage and premiums, and 

claims against NFIP. 

Key Findings

The findings from this study fall into three categories based on the study’s objectives: (1) extent of flood 

risk to FHA single-family properties; (2) extent of properties with FHA-insured mortgages in compliance 

with the requirement to carry flood insurance; and (3) relationship between NFIP claims, insurance 

coverage, and FHA loan performance. 

1 Until the adoption of the Flood Disaster Protection Act of 1973, the purchase of flood insurance was voluntary. The mandatory

purchase provision was further strengthened by the National Flood Insurance Reform Act of 1994. This Act imposed 

significant new obligations on lenders and servicers and tightened the requirement for the receipt of disaster assistance 

(FEMA, 2007). 
Flood Insurance Coverage of Federal Housing Administration Single-Family Homes | vi

EXTENT OF FLOOD RISK TO FEDERAL HOUSING ADMINISTRATION SINGLE-FAMILY PROPERTIES 

In addressing this objective, we examined the number of FHA single-family properties that are either 

inside SFHAs or close to SFHAs (within 600 meters of an SFHA), or outside SFHAs. We also examined the 

annual changes in the number of FHA single-family properties located within an SFHA, as well as the 

number of nonperforming mortgaged properties inside and outside an SFHA. The results of our analysis 

suggest the following:

 The percentage of FHA single-family properties inside SFHAs in our study states were relatively 

small compared with those outside SFHAs, although exposure to flood risk in 2019 was much 

higher in Florida (approximately 20 percent) than in North Carolina (approximately 5 percent). In 

both Florida and North Carolina, properties with FHA-insured mortgages inside SFHAs were 

mostly in zone A areas, which have a lower level of risk than zone V areas.

 The percentage of properties with FHA-insured mortgages that were within 600 meters of SFHAs 

in 2019 in our study states were much larger than those that were within an SFHA. 

Approximately 80 and 54 percent of properties with FHA-insured mortgages in Florida and North 

Carolina, respectively, were within 600 meters of SFHAs.

 While the total number of active mortgages increased quite dramatically from 2011 to 2019, the 

proportion of properties with FHA-insured mortgages within 600 meters of or inside an SFHA 

remained relatively stable during this time. 

 Although there was no significant variation in default rates for properties with FHA-insured 

mortgages inside and outside an SFHA, the default rates appeared much higher for Florida and 

North Carolina in 2017 and 2018, respectively, which can be attributed mainly to two major 

hurricanes: Hurricane Irma in Florida in 2017 and Hurricane Florence in North Carolina in 2018, 

which caused extensive flooding in these states.

EXTENT OF FEDERAL HOUSING ADMINISTRATION-INSURED PROPERTIES IN COMPLIANCE WITH THE 

MANDATORY PURCHASE REQUIREMENT

In addition to examining the number of FHA single-family homes with flood insurance by year, inside 

and outside of an SFHA, we examined the annual change in the number of active flood insurance 

policies among all FHA single-family properties and for those inside an SFHA. We also examined policy 

drop and policy take-up, by year, for all FHA single-family properties and for homes inside an SFHA. In 

addition, we examined the percentage of properties with FHA-insured mortgages inside an SFHA that 

have had flood insurance continuously from the date of the beginning of the FHA-backed mortgage. The 

results of these analyses were presented under two different methods—moderate and conservative—of 

classifying FHA-insured properties as being inside or outside an SFHA. Our findings are as follows:

 On average, the flood insurance coverage rate was significantly larger for properties with FHAinsured mortgages inside an SFHA than those outside an SFHA. Our estimates further revealed 

variation in the rates of holding flood insurance across the study’s two states and by flood 

classification method. In both states, the flood insurance coverage rate for FHA-insured 

properties inside an SFHA was larger under the conservative method than under the moderate 

method, albeit the rates in Florida, on average, were larger than the rates in North Carolina. 

 FHA-insured properties near (less than 600 meters) an SFHA carry flood insurance at rates 

similar to rates for properties farther away. In Florida, the conservative estimate showed 

approximately 5 percent of FHA-insured properties near an SFHA and 5 percent of FHA-insured 
Flood Insurance Coverage of Federal Housing Administration Single-Family Homes | vii

properties farther away from an SFHA carried flood insurance in 2019. In North Carolina, the 

conservative estimate showed approximately 2 percent of FHA-insured properties near an SFHA 

and 1 percent of FHA-insured properties farther away from an SFHA carried flood insurance in 

2019. In contrast, the conservative estimate showed 65 percent of FHA-insured properties in 

Florida and 49 percent of FHA-insured properties in North Carolina inside an SFHA carried flood 

insurance in 2019. The mandatory purchase requirement appears as a major factor in a 

homeowner’s decision to purchase flood insurance. 

 The percentage of FHA-insured properties with active flood insurance policies, for properties 

inside an SFHA, and overall, grew over time for both Florida and North Carolina, except for a 

slight decrease in Florida during 2018 and 2019. In particular, the two states experienced 

substantial growth in the number of FHA-insured properties in 2011 through 2012 for all FHA 

properties and for properties inside an SFHA. 

 For flood insurance policy take-up rates, our estimates indicate a relatively faster-growing trend, 

on average, for all FHA-insured properties compared to the trend for FHA-insured properties 

inside an SFHA in North Carolina. The flood insurance policy take-up rates in Florida fluctuated 

over time; however, the take-up rates for all FHA-insured properties were higher than those for 

the FHA-insured properties inside an SFHA. In addition, flood insurance policy drop rates 

consistently decreased from 2012 through 2019 for all FHA-insured properties and those inside 

an SFHA in North Carolina.

 Florida has a much larger percentage of all FHA-insured properties that had flood insurance

continuously compared to North Carolina. However, this share in Florida decreased slightly from 

2011 through 2019, while the share in North Carolina stayed constant across all years of the 

study. Meanwhile, the proportion of FHA-insured properties inside an SFHA that were 

continuously insured slightly increased for both North Carolina and Florida.

RELATIONSHIP BETWEEN NATIONAL FLOOD INSURANCE PROGRAM CLAIMS, FLOOD INSURANCE 

PREMIUMS, AND FEDERAL HOUSING ADMINISTRATION LOAN PERFORMANCE 

The final aspect of the analysis explored the relationship between NFIP claims, flood insurance 

premiums, and FHA loan performance. In conducting this exploration, we examined: (1) the relationship 

between the next-year default rate of FHA-insured single-family properties by flood insurance coverage 

and SFHA status; (2) average number of claims per policy year for all flood-insured FHA single-family 

properties and for those inside an SFHA; and (3) the relationship between flood insurance claims, flood 

insurance premiums, and loan performance, using a logistic regression model. The key findings are as 

follows: 

 Our results show that flood insurance coverage does not significantly matter when determining 

default rates for FHA-insured properties inside or outside an SFHA. On average, the difference 

between the next year’s default rate of FHA-insured properties with flood insurance in the 

current year and of those without flood insurance in the current year, irrespective of flood zone 

status, was less than 0.5 percentage point in both Florida and North Carolina. It is important to 

note, however, that the average default rate of the next year is highest for FHA-insured 

properties inside an SFHA with flood insurance coverage in the current year (average of 3.21 

percent in Florida and average of 2.61 percent in North Carolina). 

 Regarding flood insurance claim rates, our estimates indicate low flood insurance claim rates for 

all FHA-insured properties for both North Carolina and Florida in most years. Unusually high 
Flood Insurance Coverage of Federal Housing Administration Single-Family Homes | viii

flood insurance claim rates, however, were observed in 2011, 2016, and 2018 for North 

Carolina, and in 2017 for Florida, which can be attributed mainly to hurricanes in those years. 

For example, the high flood insurance claim rate in Florida in 2017 corresponded to the 

occurrence of Hurricane Irma in 2017. The results also indicate that FHA-insured properties 

inside an SFHA were slightly more likely to file flood insurance claims in both Florida and North 

Carolina. 

 Results of our logistic regression analysis indicate evidence of a relationship between flood 

insurance claims and loan performance in both study states, though the results differ for the 

effect of flood insurance premiums on loan performance. In North Carolina, our results show 

that higher flood insurance premium amounts and having a flood insurance claim increase the 

likelihood of defaulting in the next year. In Florida, however, we only found a relationship (a 

positive relationship) between having a flood insurance claim and the odds of defaulting in the 

next year. Premiums mattering more in North Carolina may be due to the fact that flood 

insurance is generally more expensive in North Carolina,

2 especially inside an SFHA. Therefore, 

higher premium amounts may place more burden on homeowners in North Carolina than in 

Florida. 

Limitations and Further Work

Notwithstanding the detailed empirical insights provided in this study, there are limitations worth 

highlighting for further research. First, the study is limited to two states and should, therefore, be 

considered as a pilot study. However, the research team gained a lot of knowledge in working with the 

data that is transferable to HUD and other researchers that will make studies of more states or even of 

the entire country much easier than before this pilot. Second, the determination of FHA properties 

being in/out of the SFHA relies on the latest SFHA geographic definition. To the extent that the 

boundaries change over time, the findings may be different using temporally consistent boundary files. 

However, our analysis of the potential changes in the boundary demonstrated that this was a minor 

consideration for these two states. It could be more significant in other areas. Third, the study relied on 

address matching to determine if FHA properties have flood insurance. Finding a way to avoid address 

matching would likely increase the accuracy of the analysis. 

There are also several open questions that the limited analysis in this report did not answer. The current 

study has focused mainly on flood risk exposure and loan performance of FHA-insured properties and 

does not compare with other properties. To place such analysis into context to capture a more complete 

picture of the extent of the risk, future research could help generate a better understanding by 

comparing FHA rates of properties in SFHAs with national trends, government-sponsored enterprises 

(GSEs), and conventional mortgages. Second, this study does not fully explain why default rates are so 

similar, and in fact slightly higher, for FHA-insured properties with flood insurance in an SFHA when 

compared to FHA-insured properties in an SFHA without flood insurance. Future work could examine 

default rates of FHA-insured properties with and without flood insurance before and after a major 

flooding event to investigate this issue further. Additionally, while this study provides estimates of the 

2 The mean flood insurance policy premium amount of all FHA-insured properties in North Carolina is $503.97 ($664.83 for 

properties inside an SFHA), while that of Florida is $447.25 ($545.22 for properties inside an SFHA).
Flood Insurance Coverage of Federal Housing Administration Single-Family Homes | ix

extent of FHA-insured properties in compliance with the mandatory requirement, it is unclear how many 

of the properties are truly not compliant. Future research could work to obtain more detailed data on 

elevation, changes in SFHA boundaries over time, and other factors that may impact the requirement to 

have flood insurance. Finally, while the analysis focused on SFHA as a risk indicator, it may be beneficial 

in the future to examine areas outside of the 100-year flood plain that are impacted by floods and may 

still be at risk. 
Flood Insurance Coverage of Federal Housing Administration Single-Family Homes | 1

1 INTRODUCTION

Background of Study

Flooding has become a recurrent natural hazard in the United States, with a significant percentage of 

the population vulnerable to a flooding event.3 In addition to floods being the most common natural 

disaster, they are also the most damaging, with 8 out of the 10 costliest catastrophes in the United 

States involving flooding (Karapiperis, 2017). Floods often cause enormous loss to life, property, and the 

environment. In the United States, floods and water-related events such as severe storms and 

hurricanes have resulted in more than $1 trillion in losses over the last four decades as estimated by the 

National Oceanic and Atmospheric Administration (NOAA).

4 According to NOAA’s National Centers for 

Environmental Information, these floods and their debilitating effects are occurring with increasing 

frequency. This fact is reflected in the rising number of flood-related Presidential disaster declarations. 

In the last 40 years, approximately 1,700 presidential disaster declarations have been made, and more 

than 80 percent of these declarations are tied to flood and flood-related events (Kunreuther et al., 

2019). Further, the increasing flood risk in the United States is noticeable in the increasing trend of flood 

insurance claims from the National Flood Insurance Program (NFIP) (Kunreuther et al., 2019). Since its 

inception, NFIP’s 6 costliest years have all occurred since 2005. In 2005 alone, the program paid in more 

than $17 billion5 in claims, primarily as a result of Hurricane Katrina (Kunreuther et al., 2019). Other 

catastrophic hurricanes such as Hurricanes Sandy, Harvey, Irma, and Maria led to record losses for NFIP

in 2012 (about $10 billion in claims paid) and in 2017 (an estimated $20 billion in claims paid) 

(Kunreuther et al., 2019).

Although most catastrophic events have been associated with major hurricanes, inland flooding, such as 

that caused by more than 20 inches of rainfall in parts of Louisiana in August 2016, has also caused 

significant losses (Kunreuther et al., 2019). Climate change and, in particular, storm surges and sea-level 

rise may significantly increase flood risk and losses from flooding in the coming years. By the year 2100, 

flooding is estimated to have caused approximately $1 trillion in damage to properties, representing 

about 2 percent of United States housing stock (Kunreuther et al., 2019).

Damage caused by flooding is not typically covered under a standard homeowner’s policy. Instead, flood

damage is covered by a federally backed policy issued by NFIP, which is available to homeowners, 

renters, and small businesses (Karapiperis, 2017). Historically, private insurers have not been able to 

provide flood insurance at affordable rates in the marketplace because the cost of paying out claims for 

flood damage could not be offset by affordable premiums. Until the establishment of NFIP, the national 

response to flood disasters was generally limited to providing funds for flood control projects and 

disaster assistance for flood victims (Dixon et al., 2006). The catastrophic nature of flooding led to the 

decoupling of flood insurance coverage from homeowners’ insurance policies in the mid-20th century

3 Roughly one-half the population of the United States (around 168 million people) lives in coastal watershed counties that 

represent just under 20 percent of the national land area, with some 23 million people—or 8 percent of the total 

population—living in low-elevation coastal areas (Kunreuther et al., 2019). 4 Statistics on the cost of disaster events across the United States over the last 40 years (1980 through 2019) are available at

https://www.ncdc.noaa.gov/billions/overview. 5 This cost is more than what the program has paid, altogether, since its inception in 1968 and continuing through 2004.
Flood Insurance Coverage of Federal Housing Administration Single-Family Homes | 2

and the lack of affordable stand-alone flood insurance policies. Given that a number of properties 

already existed in flood-prone areas, the Federal Government intervened to provide an insurance option 

for those homeowners, with the intention that (1) the designation of specified flood zones would serve 

as a way to inform buyers of the risks in those areas and (2) the additional requirement to purchase 

flood insurance would discourage further development in those flood-prone areas. With these goals, the 

National Flood Insurance Program (NFIP) was created in 1968 and has since evolved to cover additional 

roles that reduce risks, losses, and costs associated with flooding. Administered by the Mitigation 

Division of the Federal Emergency Management Agency (FEMA), NFIP combines the concepts of 

insurance, mapping, mitigation, and regulation. NFIP provides an incentive for communities to adopt a 

floodplain management ordinance to mitigate the effects of flooding on new and existing construction 

(FEMA, 2007). 

Since its inception, NFIP has been the major provider of flood insurance in the United States. Purchasing 

flood insurance through NFIP is generally voluntary, except for property owners who are in a Special 

Flood Hazard Area (SFHA)6 and whose mortgage loan is from a federally backed or regulated lender7

(Horn and Webel, 2019). NFIP’s functions regarding insurance include establishing the deductible/limit 

menu and setting associated premiums, including establishing rules to determine subsidized premiums 

for certain existing properties. NFIP manages the Community Rating System (CRS), a voluntary program

started in 1990 that provides discounts on flood insurance premiums in those communities that 

establish floodplain management programs and mitigation actions that exceed NFIP minimum 

requirements. To date, approximately 1,000 communities participate in CRS (FEMA, 2018). The federally 

backed insurance coverage under NFIP operates through public-private collaboration. Private insurance 

companies write flood policies, as well as process, defend, settle, and pay all claims, while NFIP is 

responsible for underwriting the losses (Michel-Kerjan, 2010). 

Currently, NFIP provides approximately $1.42 trillion in coverage for more than 5 million residential 

flood policies. In fiscal year 2018, the program received approximately $3.5 billion in annual premium 

revenue; $1.1 billion in assessment, fees, and surcharges; and $1.0 billion in payments from private 

reinsurers (Horn and Webel 2019).8 In 2017, FEMA began to re-insure NFIP, to guarantee the soundness 

of the program moving forward. From 2017 through 2020, FEMA has secured approximately $5 billion in 

traditional reinsurance coverage and has paid a reinsurance premium ranging from $150 million to $235 

million. These reinsurance purchases have covered losses from a single flooding event starting at $4 

billion and costing as much as $10 billion. Currently, there are 27 private reinsurance markets under 

FEMA’s 2020 reinsurance agreement.9

Insurance prices are set nationally by NFIP and vary by contract (choice of limit and deductible), flood 

zone, and characteristics of the insured house. Under the regular program, the total insurance limit for 

building coverage is $250,000 for single-family dwellings. The minimum deductible depends on the total 

coverage and the SFHA in which the property is located. The SFHA and the building type determine the 

6 In 1973, Congress passed the Flood Disaster Protection Act (P.L. 93-234), which established the mandatory purchase 

requirement for property owners in an SFHA with a mortgage loan from a federally backed or regulated lender. This Act also 

required that for communities to be eligible for federal disaster aid, they must participate in NFIP (Kunreuther et al., 2019). 7 See section 3.2 for a background discussion on mandatory purchase provision under NFIP.

8 Statistics on NFIP policy and claims are available at: https://www.fema.gov/policy-claim-statistics-flood-insurance. 9 Details of NFIP’s Reinsurance Program are available at: https://www.fema.gov/nfip-reinsurance-program. 
Flood Insurance Coverage of Federal Housing Administration Single-Family Homes | 3

basic and additional rates per $100 of coverage (FEMA, 2019). Above this basic calculation, additional 

charges and discounts may be applied (FEMA, 2015).10 Therefore, variation in insurance prices across 

states is driven by variation in flood risk, exposure of the insured property, and the coverage purchased 

per policy. More than two-thirds of NFIP policies are in five coastal states: Florida, Texas, Louisiana, 

California, and New Jersey (Michel-Kerjan, 2010). Exhibit 1.1 below presents NFIP summary statistics for 

these five states in 2010.

Exhibit 1.1 | Summary of National Flood Insurance Program Statistics, 2010

Geographic 

Area No. of Policies Percentage Nationwide

Insurance 

Penetration11

Annual 

Premium per 

Policy

Premium per 

$1,000 of 

Coverage

National 5,629,263 - 4% $572 $2.64

Florida 2,141,076 38.03% 25% $454 $2.05

Texas 681,425 12.11% 7% $483 $2.09

Louisiana 483,593 8.59% 26% $648 $3.00

California 276,915 4.92% 2% $720 $2.92

New Jersey 229,461 4.08% 6% $811 $3.70

Top Five 

States 3,812,470 67.73% 10% $524 $2.34

Source: Michel-Kerjan, 2010

In addition to its social goals of providing flood insurance in flood-prone areas to property owners who 

otherwise would not be able to obtain it in the private market, NFIP also engages in “non-insurance” 

activities, including flood hazard mapping, floodplain management, and flood risk mitigation programs 

(Horn and Webel, 2019). Through the Risk Mapping, Assessment, and Planning (MAP) program, FEMA

identifies flood hazards, assesses flood risks, and partners with states and communities to provide 

accurate flood hazard and risk data to guide communities to implement mitigation actions. Flood hazard 

mapping forms the basis of NFIP regulations and flood insurance requirements. Communities can enter 

the MAP program by developing floodplain management12 policies and, in return, homeowners, renters, 

and business owners in those communities will become eligible to purchase federally backed flood 

insurance (Holladay and Schwartz, 2010). NFIP requires participating communities to adopt and enforce 

minimum construction and land use regulations that make them less vulnerable to flooding. Nationally, 

more than 22,000 communities13 participate in NFIP (Horn and Webel, 2019).

10 Discounts include deductible factor, Increased Cost of Compliance premium, CRS discount, Reserve Fund Assessment, 

probation surcharge, Homeowner Flood Insurance Affordability Act of 2014 surcharge, and the federal policy fee. 

11 Insurance penetration is the ratio of the number of active insurance policies in a state compared to the number of 

households in that state.

12 Floodplain management is broadly defined to include all actions that states and communities can take to reduce flood 

damage to both new and existing buildings and infrastructure (FEMA, 2018). 13 Detailed information about the communities that participate in the NFIP can be found here: https://www.fema.gov/nationalflood-insurance-program-community-status-book. 
Flood Insurance Coverage of Federal Housing Administration Single-Family Homes | 4

NFIP creates flood maps of participating communities, dividing them into different zones according to 

varying levels of flood risk (Michel-Kerjan, 2010).

14 Zones B, C, and X are areas of moderate to low risk. 

High-risk areas or SFHAs have a 1 percent chance of flooding each year and are divided into zones V and 

A. According to a study by Tobin and Calfee (2005), more than two-thirds of all NFIP policies cover 

properties in an A zone, which designates areas that are subject to the 1 percent annual chance of 

flooding. A zones are typically adjacent to rivers, streams, and lakes, although such zones are also 

designated in coastal areas, landward of V zones, which are coastal areas subject to high-velocity wave 

action. Less than 2 percent of NFIP policies cover properties in V zones. V zones are high-risk coastal 

areas that face an additional hazard associated with storm waves. A and V zones comprise the SFHAs 

covered by the mandatory purchase requirement (Tobin and Calfee, 2005).

Objectives of this Study

In light of recent severe weather events across the United States, assessing homeowners’ exposure to 

flood hazard risk is an increasingly important concern. One of the U.S. Department of Housing and 

Urban Development’s (HUD) objectives in its 2018 through 2022 Strategic Plan is to “support sustainable 

homeownership while safeguarding the American taxpayer.” To achieve this goal, HUD seeks to 

understand the exposure of its asset portfolios to flood hazard risk. HUD administers the Federal 

Housing Administration (FHA) Mutual Mortgage Insurance program fund that insures lenders against 

loss on more than $1.26 trillion of the mortgage debt of 8.12 million low-wealth single-family 

homeowners. To prudently manage this portfolio, HUD must develop analytical tools that can help the 

agency obtain better information about flood risk exposure. 

HUD contracted with 2M Research to better understand the flood risk exposure of FHA single-family 

homes and compliance with flood insurance requirements. The study has three research objectives: 

1. Examine the number and proportion of homes located in SFHAs that have mortgages secured by 

FHA. 

2. Using NFIP data, determine whether the FHA single-family home mortgages in SFHAs comply 

with the requirement to carry flood insurance.

3. Explore the relationship between loan performance, flood insurance coverage and premiums, 

and claims against NFIP. 

In addressing these objectives, the study team first classified FHA single-family home mortgages as being 

inside or outside FEMA SFHAs. Due to potential inaccuracies in some mortgage addresses, the study 

team determined the SFHA status of FHA single-family mortgages using three different SFHA 

classification methods. Mortgages with address inaccuracies are handled differently under each 

classification method. The study team then estimated the number and proportion of FHA single-family 

home mortgages in FEMA’s SFHAs for each classification method. 

The analysis for research objectives 2 and 3 uses the SFHA classification method that produces a 

conservative estimate of the number and proportion of FHA single-family home mortgages inside SFHAs. 

The study team then determined whether the homes were in FEMA’s property-level NFIP database and 

14 See appendix B for the definition of FEMA flood zone designations.
Flood Insurance Coverage of Federal Housing Administration Single-Family Homes | 5

whether they were covered by flood insurance. We then grouped the loans according to the preceding 

criteria and arranged them by month and year from 2011 through 2019 into a longitudinal database. 

The database allowed the study team to assess the relationship between loan performance, flood 

insurance coverage and premiums, and claims against NFIP.

Organization of this Report

The outline of this report is as follows. Following this introduction, Chapter 2 provides a summary of the 

data used in the study. The chapter also outlines the study team’s approach to addressing each research 

objective. Chapter 3 reports the results of the study and is divided into three main sections in line with 

the study objectives. In the first section of Chapter 3, the study team discusses the extent of flood risk 

facing FHA’s portfolio by examining the number and proportion of FHA single-family properties located 

inside and outside of SFHAs. In the second section, we examine compliance with the mandatory 

purchase requirement for FHA single-family properties by year and inside and outside of SFHAs. In the 

last section of Chapter 3, we investigate the relationship between the loan performance of homes that 

have experienced changes in insurance rates or have recently been required to acquire a flood insurance 

policy. We also examine the effect of a flood insurance claim or a change in flood insurance policy 

premium on loan performance of properties with FHA-insured mortgage. Chapter 4, the conclusion, 

highlights the key findings of the study, discusses the limitations of the study, and identifies topics for 

additional research.
Flood Insurance Coverage of Federal Housing Administration Single-Family Homes | 6

2 DATA SOURCES AND METHODOLOGY

Data Sources

To address the research objectives outlined in Chapter 1, the study team used data from three main 

sources: the U.S. Department of Housing and Urban Development’s (HUD) quarterly extracts of singlefamily Federal Housing Administration(FHA) property database; the Federal Emergency Management 

Agency’s (FEMA) property-level National Flood Insurance Program (NFIP) database; and FEMA’s Special 

Flood Hazard Area (SFHA) status. HUD provided the FHA property data as well as the NFIP databases 

that include property-level insurance policies, premiums, and damage claims for Florida and North 

Carolina. 15 The study team accessed the SFHA data, which are public, from the FEMA Map Service 

Center (MSC) website. This section outlines the data sources used for the analyses. 

FEDERAL HOUSING ADMINISTRATION PROPERTY-LEVEL DATA

The FHA property-level data included information on all single-family properties in the United States

with mortgage loans that are backed by FHA mortgage insurance. For work on this task order, HUD 

provided the study team with data on 713,090 properties with FHA-insured mortgages in Florida and 

262,558 mortgaged properties with FHA-insurance in North Carolina with mortgage insurance 

endorsement dates after January 1, 2011. Exhibit 2.1 provides a list of the specific variables from the 

FHA property-level data that the study team used to address the three research questions. 

Exhibit 2.1 | Description of Key Variables in the Federal Housing Administration Property-Level Data

Name Description Purpose

Case Number

A unique case identifier that identifies 

the application for a specific 

property’s mortgage loan insurance. 

The study team used this variable to 

match the information on mortgage 

insurance to the information on 

default. 

SOA Code

Section of Act (SOA) code that 

describes the type of loan on the 

property. 

The study team used this variable to 

restrict the analysis to standard 

203(b)16 FHA-insured properties. 

Endorsement Date The effective date of mortgage 

insurance endorsement by FHA. 

The study team used this variable as 

the start date of the FHA insurance. 

Term Date The date the mortgage insurance was 

terminated or canceled by the lender. 

The study team used this variable as 

the end date of the FHA mortgage 

insurance. 

15 With HUD’s approval, the study team limited the geographical scope of the study from a national-level analysis to two states, 

Florida and North Carolina, purely for logistical reasons. Within the time limits of the study, and given that the data are 

extremely large—which could result in challenges with transferring, processing, and analyzing the data—it was more feasible to 

accomplish the objectives of the study on a smaller scale. We selected Florida and North Carolina mainly due to the availability

of data, especially parcel and building footprint data. Florida, in particular, has seen many changes in flooding and changes in

how insurance policy premiums have been enacted, as well as claims made against NFIP policies. 16 This comprises the majority of FHA-insured mortgages but does not include certain smaller FHA programs such as 203(k) 

mortgages for home repairs or improvements, or reserve mortgages.
Flood Insurance Coverage of Federal Housing Administration Single-Family Homes | 7

Name Description Purpose

Insurance Status 

Code

The status of the FHA insurance. This 

variable can take three values: active 

(A), terminated with claim (C), or

terminated with no claim (T). 

The study team used this variable to 

determine whether mortgage 

insurance was still active at the time 

of receiving the data. If the insurance 

status code was equal to A, the study 

team set the end date of the FHA 

mortgage insurance as November 30, 

2019. 

Address The physical address of the FHAinsured property. 

The study team used this variable to 

understand the location of properties 

and their relationships to SFHAs.

ZIP Code The 9-digit postal ZIP Code where the 

property is located. 

The study team used this variable to 

understand the location of properties 

and their relationships to SFHAs.

City The city in which the insured property 

is located. 

The study team used this variable to 

understand the location of properties 

and their relationships to SFHAs.

Latitude, Longitude

Geographical latitude and longitude 

derived by geocoding the address 

using the 2010 Census. 

The study team used this variable to 

understand the location of properties 

and their relationships to SFHAs.

Default Episode 

Number

An episode number assigned to the 

case for each distinct default episode. 

The study team used this variable to 

determine when a property with an 

FHA-insured mortgage is in default. 

Default 90-Day 

Indicator

An indicator that is equal to “Y” when 

a case is 3 or more months delinquent. 

The default value is “N” (no). The data 

are also designated “N” when the case 

is less than 90 days delinquent. 

The study team used this variable to 

determine when a property with an 

FHA-insured mortgage is in default.

FHA = Federal Housing Administration. SFHA = Special Flood Hazard Area.

NATIONAL FLOOD INSURANCE PROGRAM DATA

The NFIP data included information on the flood insurance policies, premiums, and damage claims for 

properties in the United States. HUD provided data on flood insurance policies held for properties in 

Florida and North Carolina, which were similar to the FHA property-level data. The NFIP data files HUD 

delivered included information on 20,134,290 policies in Florida and 2,033,714 policies in North 

Carolina, with policy start dates from July 30, 1974, and May 1, 1974, respectively. Exhibit 2.2 provides a 

list of the specific variables from the NFIP data the study team used to address the three research 

objectives. 
Flood Insurance Coverage of Federal Housing Administration Single-Family Homes | 8

Exhibit 2.2 | Description of Key Variables in the National Flood Insurance Program Data

Name Description Purpose

In-Force Date Policy in-force date. The study team used this variable as the 

start date of the policy. 

Out-Force Date Policy out-force date. 

The study team used this variable as the 

end date of the policy if the policy was

not canceled.

Cancelation Date Cancelation date of policy. 

The study team used this variable as the 

end date of the policy if the policy was 

canceled.

Official Latitude, 

Official Longitude

Latitude and longitude of the 

property with the flood 

insurance policy. 

The study team used this variable to 

match flood insurance policies to the 

corresponding FHA-insured mortgage and 

to match the policy data to the flood 

insurance claims data. 

Rep_address2

The physical street address line 

for the property with the flood 

insurance policy. 

The study team used this variable to 

match flood insurance policies to the 

corresponding FHA-insured mortgage and 

to match the policy data to the flood 

insurance claims data.

City

City in which the property with 

the flood insurance policy is 

located. 

The study team used this variable to 

match flood insurance policies to the 

corresponding FHA-insured mortgage and 

to match the policy data to the flood 

insurance claims data.

Zip ZIP Code of the property with 

the flood insurance policy. 

The study team used this variable to 

match flood insurance policies to the 

corresponding FHA-insured mortgage and 

to match the policy data to the flood 

insurance claims data.

Dt_of_loss Date of loss. 

The study team used this variable from 

the claims dataset to define valid claims 

as those for whom the date of loss 

occurred while the policy was still active. 

FHA = Federal Housing Administration.

SPECIAL FLOOD HAZARD AREA DATA

The SFHA area data come from the National Flood Hazard Layer (NFHL) provided as a series of 

geographic information system (GIS) layers by FEMA MSC. The study team downloaded the state-level 

files for Florida and North Carolina and imported them into ArcGIS software. The study team used the 

layer S_Fld_Haz_Ar, which provides flood hazard information on all Flood Insurance Rate Map (FIRM) 

panels within a state. The layer includes a variable called SFHA_TF that indicates whether a FIRM panel 

is an SFHA (T for “true”) or not (F for “false”). The study team used this variable to identify the location 

of all SFHAs within each state. 

An important limitation of the NFHL data is that FEMA does not maintain historical SFHA boundaries. 

The study team thus only has the most current NFHL data (as of November 2019) for use in the analysis. 
Flood Insurance Coverage of Federal Housing Administration Single-Family Homes | 9

SFHA boundaries, however, can change over time. The NFHL includes a layer S_LOMR, which provides a 

letter of map revisions (LOMRs) that can indicate changes in the SFHA boundary over time. Exhibit 2.3 

shows the number and percentage of FIRM panels with SFHAs in Florida and North Carolina with 

reported LOMRs, as well as the total square miles of all LOMRs in the state from 2011 to 2019. In both 

states, the number of panels with LOMR is very low. In Florida, the total square miles of LOMRs are 

relatively large in 2011 (259.21 square miles) and 2017 (124.39 square miles), while the number of 

square miles of LOMRs in North Carolina is small across all years (22.55 square miles is the largest in 

2018). For the purposes of this analysis, if a property was located in an SFHA using the current NFHL 

data, we assumed that the property was located in the SFHA for all years of our analysis. Although there 

are some changes in SFHA boundaries over time, exhibit 2.3 shows that the changes are rare and usually 

have a small geographic scope. Changes in SFHA boundaries likely introduce a small amount of error in 

the analysis presented in this report. 

Exhibit 2.3 | Information on Letters of Map Revisions in Florida and North Carolina, 2011–2019

Year

Florida North Carolina

Number (%) of FIRM 

Panels with SFHA and 

LOMR

Total Square 

Miles of LOMRs 

Number (%) of FIRM 

Panels with SFHA and 

LOMR

Total Square 

Miles of 

LOMRs 

2011 115 (1.65%) 259.21 46 (0.44%) 5.59

2012 46 (0.66%) 8.06 5 (0.05%) 0.51

2013 60 (0.86%) 12.04 21 (0.20%) 2.42

2014 75 (1.07%) 24.61 53 (0.51%) 6.55

2015 86 (1.23%) 23.21 29 (0.28%) 3.26

2016 142 (2.04%) 30.63 30 (0.29%) 3.16

2017 148 (2.12%) 124.39 60 (0.58%) 13.84

2018 182 (2.61%) 81.87 50 (0.48%) 22.55

2019 153 (2.19%) 43.41 25 (0.24%) 6.98

FIRM = Flood Insurance Rate Map. LOMR = Letter of Map Revisions. SFHA = Special Flood Hazard Area.

PARCEL AND BUILDING FOOTPRINT DATA

The study team obtained and utilized parcel data and building footprint data for both North Carolina 

and Florida. Parcel data for the state of North Carolina was obtained from NC OneMap (nconemap.gov) 

while parcel data for the state of Florida was obtained from the Florida Geographic Data Library

(fgdl.org). The study team identified building footprint data using 2M Research’s subscription to ArcGIS 

online. Specifically, the study team downloaded building footprint data on ArcGIS online for North 

Carolina provided by the North Carolina Floodplain Mapping Program (fris.nc.gov) and building footprint 

data for Florida provided by the Oak Ridge National Laboratory (ornl.gov). 

The study team used the parcel and building footprint data to improve the analyses in several ways:

1. The parcel data improved matches between FHA and NFIP data. Using the parcel shapefiles for 

each state, the study team was able to plot FHA and NFIP properties on the parcel maps. The 

study team was then able to determine which FHA and NFIP properties shared a parcel. 

Properties that shared the same parcel were matched together. Although the study team could 

have matched properties on their latitude and longitude without matching to the parcel 

shapefiles, the study team found that matching properties from both sources to common 
Flood Insurance Coverage of Federal Housing Administration Single-Family Homes | 10

geography significantly improved the merge between FHA and NFIP. This is because latitude and 

longitude between the two sources may differ slightly. Moreover, the parcel files provided 

boundaries so that properties that were close together would only be joined if there was 

evidence that they were located on the same parcel.

2. The building footprint data allowed the study team to more accurately assess the location of 

properties in both North Carolina and Florida. SFHAs are often very small geographies and we 

found that our estimates of properties inside an SFHA changed when using building footprints as 

opposed to latitude and longitude to understand property locations. Latitudes and longitudes 

are points, and there are several cases in which only a part of a property intersects with an 

SFHA. Using building footprints helped us to appropriately classify these properties as within an 

SFHA, even if the point projected from the property’s latitude and longitude was outside the 

SFHA. 

3. Finally, similar to the building footprints, the study team was also able to use the parcel 

shapefiles to identify properties in parcels that intersect with an SFHA, even if their building 

footprint or latitude and longitude point did not. This process informed our minimum, 

maximum, and moderate estimates that are described below. 

Approach to Research Objectives

This section provides a detailed outline of how the study team addressed the study objectives. For each 

objective, we describe the methods used to prepare the data for analysis.

APPROACH TO RESEARCH OBJECTIVE 1

The first objective of this study is to examine the number and proportion of homes located in SFHAs that 

have mortgages secured by FHA. To address this objective, the study team began by cleaning the FHA 

property data. In the FHA property data, the case number variable uniquely identifies each application 

for a specific property’s mortgage insurance. The study team used the SOA code variable to keep only 

standard 203(b) FHA insured properties. This comprises the majority of FHA-insured mortgages but does 

not include certain smaller FHA programs such as 203(k) mortgages for home repairs or improvements, 

or reverse mortgages. To determine the period during which a case is active, the study team set the 

endorsement date as the start date of the FHA mortgage insurance and created an end date variable. 

The end date variable is the termination date of the FHA mortgage insurance if the FHA mortgage 

insurance was terminated. If the FHA mortgage did not have a termination date and it was listed as 

currently active, the end date variable was set to November 30, 2019. FHA properties that did not have 

a valid start or end date entry were dropped from the analysis. 

The study team then analyzed the latitude and longitude of each case in the FHA data. The study team 

noted that several properties shared the same latitude and longitude, despite having different 

addresses. In addition, some cases in the data had different latitude and longitude coordinates, despite 

sharing the same address.

17 The study team attempted to re-geocode these addresses (27,526 in Florida 

17 Since the file is at the mortgage case level, many addresses were repeated with different case numbers, likely because a 

property mortgage loan and case number cans change over time with a refinance or sale. The study team did not re-geocode 

these addresses if the repeated addresses also had repeated latitude and longitude coordinates. 
Flood Insurance Coverage of Federal Housing Administration Single-Family Homes | 11

and 9,373 in North Carolina) to improve the accuracy of the latitude and longitude coordinates of the 

properties with FHA-insured mortgages. 

Next, the study team used GIS to identify the FHA-insured properties located inside SFHAs. The study 

team located parcel and building footprint data for the state of North Carolina and Florida and identified 

the parcel and building matched to each FHA-insured property based on the property’s latitude and 

longitude coordinates. The study team then intersected parcels and buildings with SFHAs to understand 

which parcels and buildings overlap with an SFHA. Even after re-geocoding, there were still some 

properties with latitudes and longitudes that likely were inaccurate (either a shared latitude and 

longitude across multiple addresses or different latitudes and longitudes within the same address). The 

properties with inaccurate coordinates were not matched to parcels or buildings; however, the study 

team did intersect the latitude and longitude coordinates for those properties within an SFHA for the 

moderate estimate described below. The study team provides three estimates which handle address

properties with inaccurate latitude and longitude coordinates differently: 

1. A minimum estimate that considers any properties with inaccurate latitude and longitude

coordinates to be outside of an SFHA. This estimate also considers properties to be outside of 

SFHAs if their building footprints do not intersect with an SFHA, regardless of whether their 

parcels intersect with an SFHA. 

2. A maximum estimate that considers any properties with inaccurate coordinates to be within an 

SFHA, as long as the ZIP Code of the property intersects with an SFHA. This estimate also 

considers properties to be within SFHAs if their parcels intersect with an SFHA, regardless of 

whether their building footprints intersect with SFHAs.

3. A moderate estimate that uses the inaccurate latitude and longitude coordinates to determine 

SFHA status and that assumes properties are within SFHAs if their parcels or building footprints

intersect with SFHAs. 

Finally, the study team also reports an estimate of the number of properties that are either inside or 

within 600 meters (about a 10-minute walk) of an SFHA using the latitude and longitude coordinates 

(including those deemed inaccurate). Properties that are near an SFHA likely have increased flood risk 

compared to properties further away and it is important we examine the number of properties with 

FHA-insured mortgages that may be exposed to increased flood risk, regardless of whether the property 

is within the SFHA boundary.

After determining the SFHA status of each case in the data, the study team determined the year when

each case defaulted if the property had any default activity. To determine the default year, the study 

team identified the year of the first instance that the 90-day delinquency indicator was equal to “Y.” 

Below, the study team reports the process for examining SFHA status for active FHA mortgages, as well 

as the default rate of FHA mortgages by SFHA status by year from 2011 through 2019.

APPROACH TO RESEARCH OBJECTIVE 2

The second objective of this study is to assess the extent of flood insurance coverage held by FHAinsured single-family properties in Florida and North Carolina. To achieve this research objective, the 

study team needed to merge three separate datasets: the FHA-insured single-family property data, the 

NFIP flood insurance policy data, and the NFIP flood insurance claims data. 
Flood Insurance Coverage of Federal Housing Administration Single-Family Homes | 12

The study team began by merging the FHA-insured single-family property data with the NFIP policy data. 

The FHA property data included an observation for each application for a specific property’s mortgage 

insurance. The study team anticipated that there could be different applications for mortgage insurance 

on the same property—for instance, if a property’s ownership changed. Furthermore, every application 

for mortgage insurance could be matched to multiple flood insurance policies in the NFIP data. The 

study team merged the FHA property data to the NFIP flood insurance policy data by restricting the 

merge to only those properties with unique entries in the relevant address fields. The FHA property data 

and the NFIP policy data were merged in four rounds, with different combinations of location and 

address variables in each round. The first round of the merge exercise used variables for ZIP Code, street 

address, and city; the second round used variables for ZIP Code and street address; the third round used 

variables for latitude and longitude; and the fourth round used a variable for ZIP Code and standardized 

street address. Details of the merge results are provided in the Data Analysis section below. 

The data on flood insurance policies and claims were provided to the study team as two separate files. 

The study team used a combination of address variables (ZIP Code, street address, and city); premium 

on the policy; policy start date; and policy end date to merge the policy data with the claims data. The 

final step was to merge the policy-claims data to FHA policy data using a unique identity variable 

generated as a combination of the ZIP Code, address, and policy start and end dates. A more detailed 

accounting of the study team’s data-merging process is presented in appendix A. 

Aggregate Descriptive Measures

After merging the datasets, the study team calculated aggregate measures to describe the extent of 

flood insurance coverage held by FHA-insured properties from 2011 through 2019. To compute these 

measures the study team assumed that an FHA-insured property is active in a year if the start and end 

dates of mortgage insurance include any days in that year. In a similar manner, the study team assumed 

that an FHA-insured property had an active flood insurance policy in a year if the start and end dates of 

the policy included any days in that year. A claim was assumed to be valid if the date of loss was within 

the start and end date of the associated policy. These assumptions allowed the study team to create a 

list of properties with active mortgage and/or flood insurance policies each year and to assess the extent 

of flood insurance coverage for FHA-insured properties. 

The following are the aggregate descriptive measures presented in the results section. 

1. The total number of FHA single-family properties with flood insurance as per NFIP data, by year.

2. The total number of FHA single-family properties inside an SFHA that have flood insurance, by 

year.

3. Policy drop rate: By year, the number of FHA single-family properties that drop flood insurance 

from the previous year and by year, the number of FHA single-family properties inside an SFHA 

that drop flood insurance from the previous year.

4. Policy take-up: By year, the number of FHA single-family properties that acquire flood insurance 

without having had it the previous year and by year, the number of FHA single-family properties 

inside an SFHA that acquire flood insurance without having had it the previous year. 

5. The annual change in the number of active flood insurance policies among all FHA single-family 

properties and the annual change in the number of active flood insurance policies among FHA 

single-family properties inside an SFHA. 
Flood Insurance Coverage of Federal Housing Administration Single-Family Homes | 13

6. The total number of FHA single-family properties that have had flood insurance continuously 

from the date of the beginning of the FHA-backed mortgage to the last date the mortgage is 

observed in the data. 

7. The total number of FHA single-family properties inside SFHAs that have had flood insurance 

continuously, as defined in item seven. 

APPROACH TO RESEARCH OBJECTIVE 3

The third objective of this research study is to assess the relationship between loan performance of FHAinsured properties in Florida and North Carolina, flood insurance claims and flood insurance premium 

changes. The analysis under research objective 3 was conducted using the dataset created under 

Research Objective 2, which combined the FHA-insured single-family property data, the NFIP flood 

insurance policy data, and the NFIP flood insurance claims data. 

To facilitate analysis under Research Objective 3, the study team created a longitudinal data file with 

yearly frequency. The unit of observation is the case number which identifies an application for a 

specific property’s mortgage insurance. The 2M study team presents cross-tabulations that explore the 

relationship between flood insurance claims, loan performance, and flood insurance coverage. Loan 

performance is measured by an indicator for default. The study team calculated for each year default 

rates for FHA-insured properties by SFHA status and flood insurance coverage status. The study team 

also presents by year and SFHA status the claim rate for FHA-insured properties with flood insurance. 

The study team also examined the relationship between loan performance and flood insurance claims 

using a logistic regression model. In particular, the study team analyzed the effect of a flood insurance 

claim or a change in flood insurance policy premium on loan performance for the FHA-insured property. 
Flood Insurance Coverage of Federal Housing Administration Single-Family Homes | 14

3 RESULTS

Extent of Flood Risk of Federal Housing Administration Single-Family Properties

This section addresses the first objective of the study. Specifically, it presents the findings on the 

number of Federal Housing Administration (FHA) single-family properties inside and outside Special 

Flood Hazard Areas (SFHAs). Also presented are findings on the number of FHA single-family properties

that are either inside SFHAs or close to SFHAs (within 600 meters of an SFHA). The study team chose 600 

meters because it reflects properties that are near SFHAs (within one-third of a mile or a 10-minute 

walk) that likely still have higher levels of flood risk despite the fact that they do not conform to the 

government-drawn map of an SFHA. This section also presents annual changes in the number of FHA 

single-family properties located within an SFHA. The section ends by examining, by year, the number of 

nonperforming mortgaged properties inside and outside an SFHA. These results provide insight into the 

extent of flood risk FHA’s portfolio is facing. 

FEDERAL HOUSING ADMINISTRATION SINGLE-FAMILY PROPERTIES WITHIN AND OUTSIDE AN SFHA

Exhibit 3.1 shows the number and percentage of mortgages that pertain to FHA single-family properties

that were inside an SFHA in 2019 as well as the flood zone type (A or V). The exhibit shows that 8,673

(4.89 percent) mortgages are for properties inside an SFHA in North Carolina, and 101,128 (20.36

percent) mortgages are for properties inside an SFHA in Florida. Exposure to flood risk for FHA-insured 

properties in 2019 was thus much higher in Florida than in North Carolina. In both North Carolina and 

Florida, properties with FHA-insured mortgages inside an SFHA were mostly in zone A areas, which have 

a lower level of risk than zone V areas. 

Exhibit 3.1 | Number and Percentage of Federal Housing Administration Mortgages Inside a Special 

Flood Hazard Area in 2019, Using the Moderate Estimate

State Zone A (High Risk) Zone V (High-Risk 

Coastal Area) Total

North Carolina 8,648 (4.88%) 25 (0.01%) 8,673 (4.89%)

Florida 100,909 (20.32%) 219 (0.04%) 101,128 (20.36%)

Exhibit 3.2 shows the degree of potential variability in the estimated number of properties with FHAinsured mortgages inside an SFHA in both states, depending on how the study team chose to handle 

inaccurate latitude and longitudes and parcel boundaries (see Approach to Research Questions). In 

North Carolina, the minimum, or most conservative estimate was that about 1.75 percent of mortgages 

(3,098 mortgages) were for properties within SFHAs. The maximum, or most liberal, estimate was that 

about 6.56 percent of mortgages (11,616 mortgages) were for properties within SFHAs. In Florida, the 

minimum estimate was that about 12.85 percent (63,821 mortgages) were for properties within SFHAs 

and the maximum estimate was that about 22.06 percent (109,585 mortgages) were properties within 

SFHAs. 
Flood Insurance Coverage of Federal Housing Administration Single-Family Homes | 15

Exhibit 3.2 | Percentage of Properties with Federal Housing Administration-Insured Mortgages Inside

a Special Flood Hazard Area in Florida and North Carolina in 2019, Minimum and Maximum Estimates

Included

FHA = Federal Housing Administration.

Finally, exhibit 3.3 shows that the percentage of properties with FHA-insured mortgages in North 

Carolina and Florida that were near (inside or within 600 meters of) SFHAs is much larger than those 

that were within an SFHA boundary in 2019. About 54.09 percent of properties with FHA-insured 

mortgages were within 600 meters of SFHAs in North Carolina and about 80.40 percent were within 600 

meters of SFHAs in Florida.

Exhibit 3.3 | Percentage of Properties with Federal Housing Administration-Insured Mortgages Inside

and Within 600 Meters of Special Flood Hazard Areas in North Carolina and Florida, 2019

SFHA = Special Flood Hazard Area.

4.89%

20.36%

0%

5%

10%

15%

20%

25%

North Carolina Florida

Percent of FHA Mortgages

Moderate Estimate

4.89%

20.36%

54.09%

80.40%

North Carolina Florida

Inside SFHA Within 600 meters of SFHA (Including those inside SFHA)
Flood Insurance Coverage of Federal Housing Administration Single-Family Homes | 16

The large discrepancy in the number of properties inside an SFHA and within 600 meters of an SFHA 

highlights that SFHAs are typically very narrow in width because they are often found along rivers, 

creeks, and other smaller bodies of water. Exhibit 3.4 shows a map of SFHA and FHA properties in a 

small section of North Carolina. The map shows that while the SFHA boundary is small and only contains

a few FHA-insured properties, several other FHA-insured properties are located within a 600-meter 

buffer of the SFHA boundary. As these properties are not technically inside an SFHA, a flood insurance 

policy is not required; however, the risk of flooding is likely still higher there than for properties farther 

away from an SFHA. Future analysis of flood risk may examine 500-year floodplains or properties within 

certain distances of SFHAs to capture a more complete picture of properties that are at risk of flooding. 

Exhibit 3.4 | Example Map of Special Flood Hazard Area and Properties with Federal Housing 

Administration-Insured Mortgages in North Carolina

FHA = Federal Housing Administration. SFHA = Special Flood Hazard Area.

ANNUAL CHANGES IN THE NUMBER OF FEDERAL HOUSING ADMINISTRATION SINGLE-FAMILY 

PROPERTIES WITHIN A SPECIAL FLOOD HAZARD AREA

Exhibit 3.5 shows the estimated number and percentage of active mortgages in North Carolina that 

correspond to FHA-insured properties inside an SFHA and within 600 meters of an SFHA over time from 

2011 through 2019. The exhibit shows that the total number of active mortgages increased quite 

dramatically over time from 26,303 in 2011 to 177,195 in 2019. The number of FHA-insured properties 

inside an SFHA and within 600 meters of an SFHA also increased from 1,277 (inside) and 14,202 (within 

600 meters) in 2011 to 8,673 (inside) and 95,840 (within 600 meters) in 2019. Despite the increases in 

the absolute number of FHA-insured properties, the percentage of properties inside an SFHA and within 

600 meters of an SFHA stayed relatively stable at about 5 percent and 54 percent, respectively.18

18 Note that we are unable to examine changes in SFHA boundaries over time; however, in most cases, the boundaries do not 

change for long periods of time, as shown in exhibit 2.3 in Chapter 2. Therefore, we do not expect these results would change 

very much if we were able to include SFHA boundary changes. 
Flood Insurance Coverage of Federal Housing Administration Single-Family Homes | 17

Exhibit 3.5 | Mortgages of Federal Housing Administration Properties in North Carolina: Total and

Share of Properties Inside and Near Special Flood Hazard Area, 2011–2019

FHA = Federal Housing Administration. SFHA = Special Flood Hazard Area.

Exhibit 3.6 shows the results for Florida. Again, despite large increases in the total number of active 

mortgages over time (57,479 in 2011 to 496,597 in 2019, as well as large increases in the number of 

active mortgages for properties inside (12,692 in 2011 to 101,128 in 2019) and within 600 meters of 

SFHAs (47,298 in 2011 to 399,271 in 2019), the percentage of properties inside an SFHA and within 600 

meters of an SFHA remained stable (at about 21 percent and 81 percent, respectively). 

Exhibit 3.6 | Mortgages of Federal Housing Administration Properties in Florida: Total and Share of

Properties Inside and Near a Special Flood Hazard Area, 2011 through 2019

0

20

40

60

80

100

120

140

160

180

200

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2011 2012 2013 2014 2015 2016 2017 2018 2019

Total Number of FHA Mortgages (in 1,000s)

Percent of FHA Mortgages

Year

Total Mortgages (in 1,000s) % Inside SFHA (estimate) % Within 600 Meters of SFHA

0

100

200

300

400

500

600

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2011 2012 2013 2014 2015 2016 2017 2018 2019

Total Number of FHA Mortgages (in 1,000s)

Percent of FHA Mortgages

Total Mortgages (in 1,000s) % Inside SFHA (estimate) % Within 600 Meters of SFHA
Flood Insurance Coverage of Federal Housing Administration Single-Family Homes | 18

FHA = Federal Housing Administration. SFHA = Special Flood Hazard Area.

NONPERFORMING LOAN PROPERTIES INSIDE AND OUTSIDE A SPECIAL FLOOD HAZARD AREA

Exhibit 3.7 compares the percentage of mortgages that defaulted by year for properties inside versus 

outside an SFHA. The exhibit shows that, in most years, there is very little difference in the default rate 

for properties inside and outside an SFHA; however, there are 2 years that have higher default rates in 

an SFHA—2018 in North Carolina and 2017 in Florida. Both these years correspond to major hurricanes

that caused extensive flooding in the two states, and both of these years had overall higher default rates 

for all properties with FHA-insured mortgages. In September 2018, Hurricane Florence caused major 

flooding in North Carolina. In September 2017, Hurricane Irma, a Category 5 storm, caused extensive 

flooding and damage in Florida. Finally, there was a moderate spike in the default rate in 2014 in North 

Carolina, corresponding to Hurricane Arthur, which hit the Outer Banks. Exhibit 3.7 therefore, provides 

some evidence that, during major flooding events, default rates tend to be higher for FHA-insured 

mortgages inside an SFHA than outside an SFHA. 

Exhibit 3.7 | Percentage of Mortgages for Federal Housing Administration Properties that Defaulted

Inside and Outside a Special Flood Hazard Area in North Carolina and Florida, 2011–2019

SFHA = Special Flood Hazard Area.

Extent of Federal Housing Administration Properties in Compliance with 

Requirement to Carry Flood Insurance

This section presents findings on the second objective of the study and is organized into six main 

sections. Before delving into the major results, the study team first present a brief background of the 

mandatory purchase requirement, as well as a review of studies that have examined compliance with 

this provision. Subsequently, we present our findings on the number of FHA single-family homes with 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
Flood Insurance Coverage of Federal Housing Administration Single-Family Homes | 19

flood insurance by year as well as inside and outside an SFHA. Next, we present our findings on the 

annual change in the number of active flood insurance policies among all FHA single-family properties 

and for those inside an SFHA. Findings on policy drop and policy take-up, by year, for all FHA singlefamily properties and for the homes inside an SFHA, are also presented. The section concludes with a 

discussion on the total number of all FHA single-family properties and homes inside an SFHA that had 

flood insurance continuously from mortgage origination by an FHA-approved lender. 

BACKGROUND AND RELEVANT LITERATURE ON THE MANDATORY PURCHASE PROVISION

The Flood Disaster Protection Act of 1973,19 one of the key pieces of legislation governing the National 

Flood Insurance Program (NFIP), introduced the mandatory purchase provision. This law required the 

purchase of flood insurance as a condition for obtaining a mortgage loan from federally regulated 

lending institutions for properties in an SFHA and as a condition for obtaining federal assistance. 

Generally, the mandatory purchase requirement applies to three types of property owners with homes 

located in the SFHA of participating communities:

a) Those with a property loan issued by a federally regulated lender or a government-sponsored 

enterprise. 

b) Those with a mortgage backed by the Federal Government, such as FHA, Veteran’s 

Administration, or U.S. Department of Agriculture, or a mortgage that has been transferred to a 

federal agency, such as FHA. 

c) Those who receive federal financial assistance for acquisition, construction, improvement, or 

disaster recovery of a property located in an SFHA (Shabman et al., 2019; Dixon et al., 2006). 

In a study conducted by RAND, Dixon et al. (2006) estimated that approximately 50 to 60 percent of 

single-family homes in SFHAs are subject to the mandatory purchase requirement.20 Several studies 

have examined compliance with the mandatory requirement. Tobin and Calfee (2005) cite several of 

these studies by the General Accounting Office (GAO)21 and the Federal Emergency Management 

Agency (FEMA). In the late 1980s, FEMA22 estimated that only about 12 percent of households, out of 

the 11 million households that could be covered by flood insurance in 1987, actually carried insurance. 

In a 1999 study, FEMA examined applications for disaster assistance from flood victims in August 1998 in 

northern Vermont, with the goal of determining the extent of compliance. Of the applicants in SFHAs, 

FEMA found only 16 percent had flood insurance. Of the remaining 84 percent of applicants who did not 

carry flood insurance, about one-half of them had mortgages from federally regulated lenders and 

should have had insurance (FEMA Region I 1999, cited in Tobin and Calfee, 2005). In 2000, FEMA’s Office 

of Inspector General further examined compliance with the mandatory purchase requirement in 16 

communities across 10 states. Although compliance rates in these communities were very high at 90 

19 Until the adoption of the Flood Disaster Protection Act of 1973, the purchase of flood insurance was voluntary. The 

mandatory purchase provision was further strengthened by the National Flood Insurance Reform Act of 1994. This Act 

imposed significant new obligations on lenders and servicers and tightened the requirement for the receipt of disaster 

assistance (FEMA, 2007). 20 FEMA currently estimates that there are about 7.9 million structures located within SFHAs (Tobin and Calfee, 2005).

21 The Flood Insurance Reform Act of 2004 directs GAO to conduct a study of the “adequacy of the scope of coverage provided 

under flood insurance policies in meeting the intended goal of Congress that flood victims be restored to their pre-flood 

conditions” (Tobin and Calfee, 2005).

22 This study was completed prior to the 1994 legislation that considerably strengthened the mandatory purchase provisions.
Flood Insurance Coverage of Federal Housing Administration Single-Family Homes | 20

percent, the FEMA study noted that these rates were affected by the overrepresentation of coastal 

communities, which typically have high compliance rates, in the sample (FEMA, 2000, cited in Tobin and 

Calfee, 2005). Therefore, compliance nationwide was expected to be much lower on the order of 75 to 

80 percent (Dixon et al., 2006).

In its first study in 1990, GAO examined the level of noncompliance for flood insurance in two sample 

states: Maine and Texas. The study found that, for both states, about 64 percent of properties required 

to have insurance did have insurance (GAO, 1990). In a second study in 1993, GAO examined the extent 

of compliance with the mandatory purchase requirement following the floods in New York and New 

Jersey in 1992. In that study, GAO examined why homeowners who had applied for disaster assistance 

in the two states had not been covered by flood insurance, although they lived within SFHAs. Of the 752 

flood disaster victims, 31 percent had mortgages from federally regulated lenders and were required to 

have flood insurance (GAO, 1993, cited in Tobin and Calfee, 2005). Using data on new mortgages and 

new flood insurance policies in 2002, GAO examined variations in compliance across the life of a 

mortgage loan. The study concluded that the compliance rate was high at mortgage origination; 

however, due to the dearth of sufficient data, the study was not able to determine whether compliance 

rates changed during the life of the loan (GAO, 2002, cited in Dixon et al., 2006).

The objective of this section is to assess the extent to which FHA single-family homes are in compliance 

with the mandatory requirement, by examining the number of FHA single-family homes with flood 

insurance by year and inside and outside the SFHA. In this section, the study team also examined the 

average number of claims per policy year for all flood-insured FHA single-family properties, and for 

those located within the SFHA, as well as the annual change in the number of active flood insurance 

policies among all FHA single-family properties and for those inside the SFHA. Findings on policy drop 

and policy take-up, by year, for all FHA single-family properties and for the homes inside the SFHA, are 

also presented. The section closes by presenting the total number of all FHA single-family properties and 

homes inside the SFHA that have had flood insurance continuously since origination from an FHAapproved lender.

FEDERAL HOUSING ADMINISTRATION SINGLE-FAMILY PROPERTIES (ALL AND THOSE WITHIN A SPECIAL 

FLOOD HAZARD AREA) WITH FLOOD INSURANCE, BY YEAR

Under research objective 1, FHA-insured single-family properties were classified as being inside or 

outside an SFHA based on the latest available Flood Insurance Rate Maps for Florida and North Carolina. 

The analysis presented for research objective 2 assumes that SFHA status for FHA single-family 

properties does not change over time. For instance, if a property was classified as being inside an SFHA 

in 2019, we assumed that the property was inside an SFHA in all the years from 2011 through 2019.

Exhibits 3.8 and 3.9 below present estimates of the percentage of FHA-insured properties that carried 

flood insurance from 2011 through 2019 in North Carolina and Florida respectively. The percentage of 

FHA-insured properties that carry flood insurance in a year was calculated as the share of FHA 

properties that had an active flood insurance policy in that year out of all FHA-insured properties. An 

FHA single-family property was considered to be active in a year if it was active for any amount of time 

in that year. We also assumed that an FHA-insured single-family property had an active flood insurance 

policy in a year if the policy was active for any amount of time in that year. 
Flood Insurance Coverage of Federal Housing Administration Single-Family Homes | 21

The exhibits below present the flood insurance coverage rate for all FHA-insured properties, and for 

FHA-insured properties inside and outside the SFHA separately. We present the flood insurance 

coverage rates under two different methods of classifying FHA-insured properties as being inside or 

outside an SFHA. The first method provides a moderate estimate of the number of FHA-insured 

properties that fall inside the SFHA. As described in the previous section, it uses the inaccurate latitude 

and longitude coordinates to determine SFHA status, and it assumes properties are within SFHAs if their 

parcels intersect with SFHAs. 

The second method reveals a conservative estimate of the number of FHA-insured properties that fall 

inside an SFHA. Under this method, any FHA-insured properties with inaccurate latitude and longitude 

coordinates are classified as being outside the SFHA. In addition, FHA-insured properties are considered 

to be outside the SFHA if their parcels intersect with SFHAs, but the building footprints do not. The 

location of building footprints within their parcels helps identify whether a property may be required to 

carry flood insurance; however, it does not fully capture other features and property improvements, 

such as elevation, a result of which is that a property may not be required to carry flood insurance. 

Therefore, while our analyses provide a strong assessment of rates of FHA-insured properties that carry 

flood insurance, these are not synonymous with rates of compliance.

Exhibit 3.8 | Percentage of Federal Housing Administration-Insured Properties that Carried Flood 

Insurance in North Carolina

Year

NORTH CAROLINA: Percentage of FHA-insured properties with flood insurance

Total Inside SFHA Outside SFHA

Moderate Conservative Moderate Conservative

2011 2.23 24.12 54.15 1.11 1.12

2012 2.18 24.28 55.03 1.11 1.12

2013 2.08 23.26 52.14 1.08 1.09

2014 1.87 21.23 49.03 0.95 0.96

2015 1.86 21.21 48.77 0.92 0.93

2016 1.79 20.98 48.03 0.84 0.85

2017 1.94 21.31 49.06 0.98 0.98

2018 2.16 22.34 50.51 1.14 1.15

2019 2.24 22.05 49.84 1.23 1.23

FHA = Federal Housing Administration. SFHA = Special Flood Hazard Area.

In North Carolina, the share of FHA-insured properties that carried flood insurance decreased from 2.23 

percent in 2011 to 1.79 percent in 2016 and then increased to 2.24 percent in 2019. The flood insurance 

coverage rate for FHA-insured properties inside an SFHA under the conservative method is twice the 

rate than under the moderate method. When classified under the conservative method, the flood 

insurance coverage rate for properties inside the SFHA in North Carolina ranged from 48 percent to 55 

percent. When classified under the moderate method, the flood insurance coverage rate for properties 

inside an SFHA in North Carolina ranged from 21 percent to 24 percent. For properties outside an SFHA, 

there is no significant difference in the rates using moderate and conservative methods. 

Exhibit 3.9 below presents the share of FHA-insured properties in Florida that carried flood insurance 

from 2011 through 2019. The overall share of FHA-insured properties that had flood insurance 

decreased from 25 percent in 2011 to 14 percent in 2019. In Florida as well, the flood insurance 
Flood Insurance Coverage of Federal Housing Administration Single-Family Homes | 22

coverage rate for FHA-insured properties inside an SFHA was larger when calculated under the 

conservative method than under the moderate method. However, in Florida, the difference in flood 

insurance coverage rates was not as stark as in the case of North Carolina. Under both the moderate 

and conservative methods, the flood insurance coverage rates of FHA-insured properties inside an SFHA 

fluctuated over time. For FHA-insured properties classified as being outside an SFHA (under either 

method) the flood insurance coverage rate decreased from 17 percent in 2011 to 5 percent in 2019. 

Exhibit 3.9 | Percentage of Federal Housing Administration-Insured Properties that Carried Flood 

Insurance in Florida

Year

FLORIDA: Percentage of FHA-insured properties with flood insurance

Total Inside SFHA Outside SFHA

Moderate Conservative Moderate Conservative

2011 25.04 52.71 65.09 17.19 17.41

2012 24.21 53.55 66.19 16.09 16.25

2013 23.30 53.63 66.34 15.07 15.21

2014 22.32 54.29 68.04 13.77 13.88

2015 19.97 53.60 68.98 11.03 11.10

2016 16.65 51.01 67.90 7.63 7.69

2017 16.02 50.34 67.75 7.13 7.17

2018 15.31 49.51 67.57 6.54 6.58

2019 13.70 46.75 65.17 5.25 5.28

FHA = Federal Housing Administration. SFHA = Special Flood Hazard Area.

In both Florida and North Carolina, the total number of FHA insured properties that carried flood 

insurance policies increased between 2011 and 2019 both inside and outside the SFHA. For Florida,

under the conservative method, the total number of FHA-insured properties with flood insurance 

policies increased from 14,391 in 2011 to 68,023 in 2019. In North Carolina, the total number of FHAinsured properties with flood insurance policies increased from 586 in 2011 to 3,978 in 2019. Exhibits

C.1 and C.2 in appendix C provide further details. 

Exhibit 3.10 investigates whether FHA-insured properties are more likely to have flood insurance policies 

if they are near the SFHA. The exhibit shows the percentage of FHA-insured properties, using the 

conservative estimate, in Florida and North Carolina, with flood insurance policies in 2019 inside an 

SFHA; outside, but within 600 meters of an SFHA; or more than 600 meters outside of an SFHA. FHAinsured properties near (600 meters or less) an SFHA, but not inside an SFHA, were only slightly more 

likely to carry flood insurance in 2019 than properties further away from an SFHA (more than 600 

meters) in both states. This finding suggests that the requirement to carry flood insurance plays a big 

part in homeowners’ decision on whether to buy a flood insurance policy. Consideration of risk may also 

be a factor, as FHA-insured properties were slightly more likely to carry flood insurance when they were 

near an SFHA, but the evidence shows that risk consideration is likely a much smaller factor than the 

regulation. 
Flood Insurance Coverage of Federal Housing Administration Single-Family Homes | 23

Exhibit 3.10 | Percentage of Federal Housing Administration-Insured Properties with Flood Insurance 

Policies in 2019, Conservative Estimate 

SFHA = Special Flood Hazard Area.

This subsection has presented the flood insurance coverage rates for FHA-insured properties under both 

the conservative and moderate methods of flood zone status classification. The remaining analysis for 

research objectives 2 and 3 uses the SFHA classification of properties that is produced by the 

conservative method. 

ANNUAL CHANGE IN ACTIVE FLOOD INSURANCE POLICIES (AMONG ALL FEDERAL HOUSING 

ADMINISTRATION SINGLE-FAMILY PROPERTIES AND AMONG THOSE WITHIN A SPECIAL FLOOD 

HAZARD AREA) 

Exhibit 3.11 presents the annual change in the number of FHA-insured properties with active flood 

insurance policies from 2011 through 2019. The annual change in the FHA properties with active flood 

insurance policies was calculated as the percentage change in the number of FHA properties with active 

flood insurance policies from the previous year. The exhibit presents results for all FHA-insured

properties and FHA-insured properties inside an SFHA separately. 

49.84%

1.60% 0.83%

65.17%

5.47% 4.69%

Inside SFHA Outside SFHA But Within 600 Meters More than 600 Meters Outside SFHA

North Carolina Florida
Flood Insurance Coverage of Federal Housing Administration Single-Family Homes | 24

Exhibit 3.11 | Annual Percentage Change in Number of Active Flood Insurance Policies Among Federal 

Housing Administration-Insured Properties

Year North Carolina Florida 

Total Inside SFHA Total Inside SFHA

2012 110 109 98 105

2013 44 41 47 52

2014 6 9 18 26

2015 23 28 16 32

2016 11 16 2 19

2017 19 14 11 14

2018 19 14 7 10

2019 10 6 -2 4 

SFHA = Special Flood Hazard Area.

For both Florida and North Carolina, the percentage change in the number of FHA-insured properties 

with active flood insurance policies was the highest from 2011 through 2012, both overall and for

properties inside an SFHA. However, as presented in exhibits 3.8 and 3.9, the proportion of FHA-insured

properties with flood insurance coverage did not change much from 2011 through 2012. This fact

suggests that the growth in the number of FHA-insured properties with active flood insurance policies

(both overall and inside the SFHA) is driven by an increase in the number of FHA-insured properties both 

overall and inside the SFHA. The number of FHA-insured properties with active flood insurance 

policies—overall and inside the SFHA—was growing between 2011 and 2018, but at a decreasing rate. 

In the case of Florida, the annual change in FHA-insured properties with active flood insurance policies 

was positive in 2011 through 2018. However, the number of FHA-insured properties with active flood 

insurance policies decreased by 2 percent in 2018 through 2019. This decrease in 2018 and 2019 was 

driven by a decrease in the number of FHA single-family properties with active flood insurance policies 

outside an SFHA. 

In North Carolina, the growth in the total number of FHA single-family properties with active flood 

insurance policies was positive but decreased from 2012 through 2019. The factors driving the annual 

change in the number of FHA properties with active flood insurance policies can be better understood 

by analyzing the flood insurance policy take-up rate and policy drop rate detailed below. 

FLOOD INSURANCE POLICY TAKE-UP RATE BY YEAR FOR ALL FEDERAL HOUSING ADMINISTRATION 

SINGLE-FAMILY PROPERTIES AND FOR PROPERTIES WITHIN A SPECIAL FLOOD HAZARD AREA

Exhibit 3.12 below shows the flood insurance policy take-up rate by year for all FHA single-family 

properties and for properties inside an SFHA for both North Carolina and Florida. The flood insurance 

policy take-up rate was calculated as follows: For each year, the study team first calculated the number 

of FHA single-family properties that did not have flood insurance in the previous year but had it in the 

current year. The study team then calculated the total number of FHA single-family properties that had 

active flood insurance policies in the current year. The flood insurance policy take-up rate in a year was 

defined as the share of FHA-insured properties with active flood insurance policies in a year that did not 

have flood insurance in the previous year. 
Flood Insurance Coverage of Federal Housing Administration Single-Family Homes | 25

Exhibit 3.12 | Flood Insurance Policy Take-Up Rate by Year for North Carolina and Florida for All 

Federal Housing Administration-Insured Single-Family Properties and for Properties Inside a Special 

Flood Hazard Area, 2011–2019

SFHA = Special Flood Hazard Area.

For both Florida and North Carolina, in 2012 through 2019, the flood insurance policy take-up rate for all 

FHA single-family properties was higher than the flood insurance policy take-up rate for FHA singlefamily properties inside an SFHA. 

In North Carolina, the flood insurance policy take-up rate for all FHA single-family properties increased 

from 3 percent in 2012 to 13 percent in 2018 and decreased to 9 percent in 2019. For properties inside 

an SFHA, the flood insurance policy take-up rate followed a similar pattern, increasing from 1 percent in 

2012 to 5 percent in 2018 and decreasing to 2.7 percent in 2019. 

In Florida, the flood insurance policy take-up rate did not consistently increase from 2012 through 2019. 

The flood insurance policy take-up rate over this time period for all FHA single-family properties was, on 

average, higher than the take-up rate for properties inside an SFHA. However, in 2019, the flood 

insurance policy take-up rate was very similar for both types: 2.4 percent for all FHA-insured properties 

and 1.3 percent for FHA-insured properties inside an SFHA. Details regarding the number of FHA singlefamily properties, by year, that acquired flood insurance without having had it the previous year are 

provided in exhibits C.3 and C.4. in appendix C. 

FLOOD INSURANCE POLICY DROP RATE BY YEAR FOR ALL FEDERAL HOUSING ADMINISTRATION SINGLEFAMILY PROPERTIES AND FOR PROPERTIES WITHIN A SPECIAL FLOOD HAZARD AREA

Exhibit 3.13 below shows the flood insurance policy drop rate by year for all FHA single-family properties 

and for properties inside an SFHA for both North Carolina and Florida. To calculate the flood insurance 

policy drop rate for each year, the study team first calculated the number of FHA single-family 

properties that had flood insurance in the previous year but did not have it in the current year. The 

study team then calculated the total number of FHA single-family properties that had active flood 

insurance policies in the previous year. The flood insurance policy drop rate in a year is defined as the 

share of FHA-insured properties with active flood insurance policies in the previous year that dropped 

their flood insurance policy in the current year. 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
Flood Insurance Coverage of Federal Housing Administration Single-Family Homes | 26

Exhibit 3.13 | Flood insurance Policy Drop Rate by Year for North Carolina and Florida, 2011–2019

SFHA = Special Flood Hazard Area.

For both Florida and North Carolina, in 2012 through 2019, the flood insurance policy drop rate for all 

FHA single-family properties was higher than the flood insurance policy drop rate for FHA single-family 

properties inside an SFHA. 

In North Carolina, the flood insurance policy drop rate for all FHA single-family properties decreased 

from 12 percent in 2012 to 7.5 percent in 2019. For properties inside an SFHA, the flood insurance policy 

drop rate neither increased nor decreased consistently during the study. From 2012 through 2019, the 

policy drop rate for properties inside an SFHA spanned a narrow range, the lowest being 2.4 percent in 

2017 and the highest being 3.8 percent in 2012. 

In Florida, the flood insurance policy drop rate for all FHA single-family properties increased in 2014 

through 2016, with a peak policy drop rate of 17 percent in 2016. This trend was primarily driven by the 

drop in flood insurance policies for FHA properties that were outside an SFHA. Between 2016 and 2019, 

the flood insurance policy drop rate for all FHA single-family properties in Florida decreased from 17 

percent in 2016 to 10 percent in 2019. Further details on the number of FHA properties that dropped 

flood insurance after having had it the previous year are available in exhibits C.5 and C.6 of appendix C. 

FEDERAL HOUSING ADMINISTRATION SINGLE-FAMILY PROPERTIES (OVERALL AND INSIDE A SPECIAL 

FLOOD HAZARD AREA) THAT HAVE HAD FLOOD INSURANCE CONTINUOUSLY

Exhibit 3.14 below presents the percentage of FHA single-family properties in Florida and North Carolina 

that had flood insurance continuously from 2011 through 2019. The exhibit presents the results 

separately for all FHA single-family properties and for FHA single-family properties inside an SFHA. An 

FHA single-family property is categorized as having flood insurance continuously if it had at least one 

active flood insurance policy in every year that the FHA mortgage insurance was active. The percentage 

of FHA single-family properties that had flood insurance continuously in a year is calculated as the share 

of all FHA single-family properties that had flood insurance continuously. 

 

 

 

 

 

 

 

 

 

 

 

 
Flood Insurance Coverage of Federal Housing Administration Single-Family Homes | 27

Exhibit 3.14 | Percent of Federal Housing Administration-Insured Properties that had Flood Insurance 

Continuously, Overall and Inside a Special Flood Hazard Area, 2011–2019

Year

North Carolina Florida 

Total Inside SFHA Total Inside SFHA

2011 1.43 47.70 14.78 54.05

2012 1.44 48.88 14.58 55.77

2013 1.38 46.14 14.16 56.54

2014 1.30 44.06 13.75 57.84

2015 1.32 44.04 13.15 59.38

2016 1.32 43.83 12.28 59.64

2017 1.38 44.82 11.88 59.84

2018 1.50 45.00 11.75 60.31

2019 1.66 45.29 11.87 60.46

SFHA = Special Flood Hazard Area.

For both Florida and North Carolina, the share of FHA single-family properties that had flood insurance 

continuously is higher for the properties inside an SFHA than for all FHA single-family properties. In 

North Carolina, the share of all FHA single-family properties with continuous flood insurance is stable, at

around 1 percent in 2011 through 2019. The share of FHA single-family properties inside an SFHA that 

had flood insurance continuously fluctuates over time. 

In Florida, the share of all FHA single-family properties that had flood insurance continuously decreased 

from 15 percent in 2011 to 12 percent in 2019. On the other hand, the share of FHA single-family 

properties inside an SFHA that had flood insurance continuously increased from 54 percent in 2011 to 

60 percent in 2019. 

In both states, while the share of FHA-insured properties that continuously had flood insurance has 

fluctuated over time, the total number of FHA-insured properties (overall and inside the SFHA) that 

continuously had flood insurance coverage increased from 2011 through 2019. Exhibit C.7 in appendix C 

provides further details. 

Relationship Between National Flood Insurance Program Claims, Flood 

Insurance Premiums, and Federal Housing Administration Loan Performance 

In the previous sections of this chapter, we have examined the proportion of properties with FHAinsured mortgages inside and outside SFHAs (in Section One) and the extent those properties carry flood 

insurance (in Section Two). These analyses have provided some insights into the extent of flood risk 

facing properties with FHA-insured mortgages, the loan performance of those properties, compliance 

with the mandatory requirement, the incidence of flood damage claims, and changes in the premium 

rates. In this section, through the combination of longitudinal data on FHA single-family status, SFHA 

status, and NFIP premiums, the study team examines evidence of a relationship between troubled 

mortgages and risk exposure, flood damage claims, and flood insurance premiums. The results of the 

analysis on the relationship between NFIP claims, flood insurance premiums, and FHA loan performance 

appear in three interrelated subsections. First, we present the findings on our analysis of the 

relationship between flood insurance coverage and FHA loan performance at the extensive margin, 
Flood Insurance Coverage of Federal Housing Administration Single-Family Homes | 28

which we have achieved by comparing the FHA-insured loan performance of properties (hereafter 

identified as “FHA-insured properties” for convenience23) that had active flood insurance policies with 

the loan performance of FHA-insured properties that did not have active flood insurance policies. Next, 

we present findings on the average number of flood insurance claims per policy year for all floodinsured FHA single-family properties and for those inside an SFHA. This analysis only provides a 

backdrop for the final part of this section, where we explore the relationship between NFIP claims, flood 

insurance premiums, and loan performance. 

DEFAULT RATE FOR FEDERAL HOUSING ADMINISTRATION-INSURED SINGLE FAMILY PROPERTIES BY 

FLOOD INSURANCE COVERAGE STATUS

This subsection explores the relationship between flood insurance coverage status and loan 

performance of FHA-insured single-family properties. The loan performance of an FHA-insured property 

was measured by an indicator of default. Exhibits 3.15 and 3.16 below present the next-year default rate 

of FHA-insured single-family properties by flood insurance coverage and SFHA status for North Carolina 

and Florida respectively. The next year’s default rate for FHA-insured properties inside an SFHA with 

flood insurance coverage in the current year was calculated as the share of FHA-insured properties 

inside an SFHA with flood insurance coverage in the current year that defaulted in the next year. 

Exhibit 3.15 | North Carolina: Next Year Default Rate of Federal Housing Administration-Insured 

Properties by Flood Insurance Coverage and Special Flood Hazard Area Status

SFHA = Special Flood Hazard Area.

In North Carolina, for FHA-insured properties outside an SFHA, the next year’s default rate for properties 

with or without flood insurance coverage fluctuated over time. No clear patterns emerged when the 

23 We adopt this short-hand convention for identifying properties that have a mortgage loan insured by FHA with the 

recognition that FHA insures lenders against loss on mortgage loans, not properties. FHA does not insure property owners 

against loss on property.

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

2011 2012 2013 2014 2015 2016 2017 2018

North Carolina: Next Year Default Rate

Inside SFHA: with flood insurance in (t) Inside SFHA: without flood insurance in (t)

Outside SFHA: with flood insurance in (t) Outside SFHA: without flood insurance in (t)
Flood Insurance Coverage of Federal Housing Administration Single-Family Homes | 29

study team compared the default rates for properties outside an SFHA with and without flood insurance 

coverage. 

From 2011 through 2018, the next year’s default rate in North Carolina spanned a narrow range, the 

lowest being 1.22 percent in 2016 and the highest being 2.75 percent in 2017 for FHA-insured properties

outside an SFHA with flood insurance coverage. Similarly, for FHA-insured properties outside an SFHA 

without flood insurance, the next year’s default rate ranged from 1.97 percent in 2018 to 2.45 percent

in 2017. 

For properties with FHA-insured mortgages inside an SFHA, again, no clear pattern emerges. The next 

year’s default rate fluctuated over time both for properties with flood insurance coverage in the current 

year and for properties without flood insurance coverage in the current year. However, there was a 

spike in the next year’s default rate in 2017: 4.40 percent for properties with flood insurance coverage in 

2017 and 3.02 percent for properties without flood insurance coverage in 2017. In other words, the 

share of properties inside the SFHA with flood insurance coverage in 2017 that defaulted in 2018 is 4.40 

percent, the highest over the period of analysis. It is worth noting that this spike could correspond to 

one of two hurricanes that impacted North Carolina: Hurricane Matthew in 2016 and Hurricane Florence 

in 2018. However, solely based on exhibit 3.15 above, it is unclear whether the spike in next year’s

default rate in 2017 was a delayed effect of Hurricane Matthew or an immediate effect of Hurricane 

Florence. 

Exhibit 3.16 below presents the next year’s default rate for FHA-insured properties in Florida by flood 

insurance coverage status and FHA status. 

Exhibit 3.26 | Florida: Next Year Default Rate of Federal Housing Administration-Insured Properties by 

Flood Insurance Coverage and Special Flood Hazard Area Status

SFHA = Special Flood Hazard Area.

In Florida, the next year’s default rate for FHA-insured properties irrespective of flood insurance 

coverage status and flood zone status decreased between 2011 and 2015, increased sharply in 2016, 

and then decreased again through 2018. When averaging over all years, 2011 through 2019, the next 

0%

2%

4%

6%

8%

10%

2011 2012 2013 2014 2015 2016 2017 2018

Florida: Next Year Default Rate

Inside SFHA: with flood insurance in (t) Inside SFHA: without flood insurance in (t)

Outside SFHA: with flood insurance in (t) Outside SFHA: without flood insurance in (t)
Flood Insurance Coverage of Federal Housing Administration Single-Family Homes | 30

year’s default rate is lowest for FHA-insured properties outside an SFHA with flood insurance coverage 

in the current year (2.61 percent). For FHA-insured properties outside the SFHA without flood insurance 

coverage in the current year, the average next year’s default rate was 2.98 percent. The average next 

year’s default rate was highest for FHA-insured properties inside an SFHA with flood insurance coverage 

in the current year, with an average of 3.21 percent for 2011 through 2018.

Exhibit 3.16 shows that the next year’s default rate for all types of FHA-insured properties was highest in 

2016, irrespective of SFHA or flood insurance coverage status. This sharp spike in the next year’s default 

rate seems to correspond to the hurricanes in 2017, most likely Hurricane Irma. The patterns of next 

year default rate and weather events around the same time suggest an immediate effect of the 

hurricane in 2017, rather than a delayed effect of any earlier weather event. 

CLAIMS RATE FOR ALL FLOOD-INSURED FEDERAL HOUSING ADMINISTRATION PROPERTIES AND THOSE

WITHIN A SPECIAL FLOOD HAZARD AREA

In addition to the analysis of the relationship between flood insurance coverage and FHA loan 

performance at the extensive margin, the study team explored the relationship between FHA-insured 

properties and characteristics of the active flood insurance policies on those properties. As a prelude to 

that discussion in the next subsection, we present here the findings on the average number of claims 

per policy year for all flood-insured FHA single-family properties and for those inside an SFHA. Exhibit

3.17 below presents the claim rate for FHA-insured properties with flood insurance coverage for both 

North Carolina and Florida. The claim rate in a year is the share of flood-insured FHA-insured properties 

that made at least one claim in that year. For each state, Florida and North Carolina, exhibit 3.17 also 

lists major hurricanes that affected the state in each year.

24 

Exhibit 3.17 | Flood Insurance Claim Rate for all Flood-Insured Federal Housing Administration-Insured 

Properties

Year

Florida North Carolina

Major 

Hurricanes

Inside 

SFHA

Outside 

SFHA

Major 

Hurricanes

Inside 

SFHA

Outside 

SFHA

Mean Claim 

rate N/A 0.6 0.3 N/A 4.8 1.4

2011 Irene, Rina 0.1 0.1 Irene 8.5 0.7

2012 Isaac, Sandy 0.4 0.3 Sandy 0.8 0.2

2013 - 0.1 0.1 - 0.9 0.6

2014 Arthur 0.1 0.2 Arthur 0.3 0.0

2015 Joaquin 0.2 0.1 - 0.7 0.2

24 The information on hurricanes affecting North Carolina and Florida was collected from different sources. North Carolina: 

https://en.wikipedia.org/wiki/List_of_North_Carolina_hurricanes_(2000%E2%80%93present); 

https://www.wsj.com/articles/the-worst-hurricanes-to-hit-the-carolinas-1536744601; 

https://www.weather.gov/ilm/Top_20_Storms. Florida: 

https://en.wikipedia.org/wiki/List_of_Florida_hurricanes_(2000%E2%80%93present); 

https://www.baynews9.com/fl/tampa/news/2015/8/28/tropical_storms_in_florida_since_2000; 

https://www.coastalliving.com/travel/top-10/costliest-hurricanes-united-states. 
Flood Insurance Coverage of Federal Housing Administration Single-Family Homes | 31

2016 Hermine, 

Matthew 0.4 0.1 Matthew 9.7 1.6

2017 Gert, Irma, 

Nate 2.5 1.0 Jose, Maria 0.4 0.2

2018 Michael 0.2 0.2 Florence 17.3 5.7

2019 Barry, Dorian, 

Humberto 0.0 0.0 Dorian, Humberto 0.4 0.2

N/A = data not available. SFHA = Special Flood Hazard Area.

In North Carolina, the flood insurance claim rate was particularly high in the years 2011, 2016, and 2018. 

These high rates appear to correspond to Hurricane Irene, Hurricane Matthew, and Hurricane Florence, 

respectively. In all three cases, the flood insurance claim rate for flood-insured FHA properties inside an 

SFHA was significantly higher than the flood insurance claim rate for flood-insured FHA-insured

properties outside an SFHA. For the other years, the flood insurance claim rate was below 1.0 percent 

for flood-insured FHA-insured properties both inside and outside the SFHA, but always higher for FHAinsured properties inside an SFHA. 

In Florida, the claim rate is much lower on average than in North Carolina. The claim rate was highest in 

2017, with a claim rate of 2.5 percent for flood-insured FHA-insured properties inside the SFHA and a 

claim rate of 1.0 percent for flood-insured FHA-insured properties outside the SFHA. A higher-thanaverage claim rate in 2017 appears to correspond to Hurricane Irma. 

The discrepancy in the magnitude of the claim rate between North Carolina and Florida could arise from 

the differences in the building codes in the two states. A 2018 report by the Insurance Institute of 

Building and Home Safety rates states on the effectiveness of adoption and enforcement of the building 

code program. Under this system, Florida is rated the highest among all states with a score of 95, while 

North Carolina has a score of 83 (IBHS, 2018). A prior study conducted by IBHS following Hurricane 

Charley in 2004 found that improvements to the codes adopted in 1996 and enforced in Florida resulted 

in a 60 percent reduction in residential property damage frequency (number of claims) and a 42 percent 

reduction in damage severity (cost of claims) (IBHS, 2004). Similar patterns in the magnitude of claims 

between North Carolina and Florida have been observed in reports examining claims for residential 

properties (see FEMA, 2017).

CHANGES IN LOAN PERFORMANCE BY FLOOD DAMAGE CLAIM, INSURANCE COVERAGE, AND SPECIAL 

FLOOD HAZARD AREA STATUS

The above two subsections present aggregate default rates and claim rates of FHA-insured properties by 

flood insurance coverage and SFHA status. In this part of the analysis, the study team further explores 

the relationship between loan performance and flood insurance coverage, claims, and SFHA status at 

the FHA-insured property level using a logistic regression model. 

The unit of analysis is the case number, a unique number that identifies an application for a specific 

property’s mortgage insurance. The dependent variable of interest is the loan performance of an FHAinsured mortgage, defined by a binary variable indicating the first time an FHA-insured mortgage was in 

default. The logistic regression analysis restricts the analysis to only those FHA-insured properties that 

have active flood insurance policies. The study team analyzed the effect of a flood insurance claim on 

loan performance of an FHA-insured mortgage. 
Flood Insurance Coverage of Federal Housing Administration Single-Family Homes | 32

The analysis described above was undertaken while accounting for the SFHA status of the FHA-insured 

mortgage, the monthly mortgage payment on the FHA-insured property, and the monthly effective 

income of the borrower. 

Exhibit 3.18 below presents summary statistics of the monthly mortgage payments, the monthly 

effective income of the borrower, and the mortgage-to-income ratio of FHA-insured properties in 

Florida and North Carolina by flood zone status. 
Flood Insurance Coverage of Federal Housing Administration Single-Family Homes | 33

Exhibit 3.18 | Summary Statistics of Monthly Mortgage Payment, Monthly Effective Income, and 

Mortgage Payment to Income Ratio of FHA-insured Properties

No. of 

Observations Mean 25th Percentile 50th Percentile 75th Percentile

North Carolina

Monthly mortgage 

payment 220,657 $1,054 $759 $1,006 $1,322

Inside SFHA 3,693 $1,113 $780 $1,063 $1,418

Outside SFHA 207,314 $1,054 $760 $1,006 $1,321

Adjusted monthly 

effective income 220,657 $4,381 $2,541 $4,001 $6,028

Inside SFHA 3,693 $4,545 $2,656 $4,167 $6,138

Outside SFHA 207,314 $4,379 $2,541 $4,000 $6,030

Adjusted ratio of 

mortgage payment 

to income

187,507 0.24 0.18 0.23 0.30

Inside SFHA 3,197 0.25 0.18 0.24 0.31

Outside SFHA 176,113 0.24 0.18 0.23 0.30

Policy premium 

amount 4,803 $503.97 $310.50 $356.67 $515.00

Inside SFHA 1,914 $664.83 $337.50 $473.83 $815.00

Outside SFHA 2,371 $380.18 $295.00 $345.00 $375.00

Florida 

Monthly mortgage 

payment 581,979 $1,345 $955 $1,275 $1,676

Inside SFHA 77,209 $1,568 $1,143 $1,516 $1,940

Outside SFHA 452,528 $1,298 $925 $1,231 $1,612

Adjusted monthly 

effective income 581,979 $4,873 $3,040 $4,428 $6,336

Inside SFHA 77,209 $5,290 $3,397 $4,854 $6,763

Outside SFHA 452,528 $4,772 $2,975 $4,333 $6,235

Adjusted ratio of 

mortgage payment 

to income

527,846 0.28 0.21 0.28 0.35

Inside SFHA 70,826 0.30 0.24 0.30 0.37

Outside SFHA 409,939 0.28 0.21 0.27 0.34

Policy premium 

amount 116,205 $447 $299.5 $348 $428

Inside SFHA 52,796 $545.22 $298.00 $380.00 $627.00

Outside SFHA 51,409 $353.20 $299.00 $345.33 $374.00

SFHA = Special Flood Hazard Area.

Notes: The statistics for adjusted monthly income and ratio of the mortgage payment to income presented above are 

calculated after adjusting low-income amounts in the data. The low-income amounts in the data are adjusted as follows. For 

each state, the study team determined the lowest percentile with an income value strictly greater than zero. For North 

Carolina, this was the 14th percentile of the income distribution. The study team then set the income amount to zero for 

income values between the 14th and 15th percentile of the income distribution. Following a similar method, for Florida income 

amounts between the 8th and 9th percentile are set to zero.
Flood Insurance Coverage of Federal Housing Administration Single-Family Homes | 34

In North Carolina, the mean monthly mortgage payment on FHA-insured mortgages was very similar for 

FHA-insured properties inside and outside an SFHA. The mean monthly effective income is slightly 

higher for borrowers with FHA-insured properties inside an SFHA than for those with FHA-insured 

properties outside an SFHA. The distribution of mortgage payment-to-income ratio is very similar for 

properties outside an SFHA and inside an SFHA. 

In the case of Florida, the mean monthly effective income and monthly mortgage payment were higher 

for FHA-insured properties inside an SFHA than for FHA-insured properties outside an SFHA. The median 

mortgage payment-to-income ratio was only slightly higher for properties inside the SFHA than outside 

an SFHA. 

It is important to note that in both North Carolina and Florida, the income data has been adjusted to 

account for low-income amounts recorded in the FHA data25. The regression analysis presented below 

includes the adjusted income amounts as a control. This is done to ensure that the estimates for the 

regression analysis is not driven by outliers in the data. 

As indicated earlier, a logistic regression model was used to examine how the various variables 

described above affect the loan performance of an FHA-insured mortgage. The outcome of interest in a 

logistic model is a dichotomous variable (in this case whether or not there was a default against the 

FHA-insured mortgage in period t+1). The logistic regression model developed here estimates the odds 

that an FHA-insured mortgage defaulted in the next year given the mortgage and SFHA characteristics 

included in the model.

26 The results of the logistic regression model are presented in terms of odds 

ratios. This allows us to identify the effects of each variable on the relative likelihood of defaulting in the 

next year.

27 In the logistic regression model presented below, the odds ratio measures the association 

between the FHA-insured mortgage’s characteristics in a given year and the FHA-insured mortgage’s 

default event in the next year. 

An odds ratio equal to 1 indicates no association between the FHA-insured mortgage’s characteristics 

and the FHA-insured mortgage’s default event in the next year. An odds ratio greater than 1 indicates a 

positive association between the FHA-insured mortgage’s characteristics in a given year and the FHAinsured mortgage default event in the next year. In other words, the odds ratio for a particular 

explanatory variable represents the effect of that variable on the relative likelihood that the FHAinsured property will default in the next year.

The results of the analysis are summarized in exhibits 3.19 and 3.20 for North Carolina and Florida, 

respectively. The analysis uses data from all years, 2011 through 2019, but is restricted to FHA-insured 

properties with active flood insurance coverage in that year. 

25 The low income amounts in the data are adjusted as follows. For each state, the study team determined the lowest percentile 

with an income value strictly greater than zero. For North Carolina this was the 14th percentile of the income distribution. The 

study team then set the income amount to zero for income values between the 14th and 15th percentile of the income 

distribution. Following a similar method, for Florida income amounts between the 8th and 9th percentile are set to zero. 26 “The odds of an event is the probability that an event occurs divided by the probability that it does not occur. Thus, if an 

event occurs with probability of 0.6, the odds ratio is 1.5 (0.6/0.4). The odds of an event and the probability of an event are 

fairly similar in magnitude for probabilities less than 0.25” (Dixon et al., 2006). 27 While odds ratio must be interpreted with care, they are easier to interpret than the coefficients of the logistic regression 

(Dixon et al., 2006).
Flood Insurance Coverage of Federal Housing Administration Single-Family Homes | 35

The outcome of interest or dependent variable in all columns is a variable that indicates whether an 

FHA-insured property defaulted in the next period, which is a proxy for loan performance. The first 

column of the exhibits present the effect of having at least one flood insurance claim in a given year on 

the relative likelihood of the FHA-insured property defaulting in the next year. Column (1) of exhibit 3.19

shows that the relative likelihood of defaulting in the next year is 1.9 times larger when an FHA-insured 

property had at least one flood insurance claim in the current year than when the FHA-insured property 

had no flood insurance claims in the current year. This result is statistically significant at a 99-percent 

confidence level. 

Exhibit 3.19 | North Carolina: Flood Insurance Claims and Loan Performance

North Carolina

Dependent Variable: Loan Performance (= 1 if FHA property defaults in t+1, 0 otherwise) 

(1) (2) (3) (4) (5) (6) 

At least one claim in t 1.896*** 1.848** 1.675* 

At least one claim in t-1 1.722 1.726 2.092** 

SFHA status 1.081 1.03 0.994 0.871 

Monthly mortgage payment 

(logs) 1.783*** 1.832*** 

Adjusted monthly effective 

income (logs) 0.472*** 0.428*** 

Year fixed effects Yes Yes Yes Yes Yes Yes

Constant 0.0223*** 0.0218*** 0.161 0.0273*** 0.0273*** 0.477 

No. of observations 15,451 15,451 13,335 10,839 10,839 9,326 

FHA = Federal Housing Administration. SFHA = Special Flood Hazard Area.

Notes: The symbols ***, **, and * represent significance values of p ≤ 0.01, p ≤ 0.05, and p ≤ 0.1, respectively.

The second column of the exhibits present the results while additionally controlling for whether the 

FHA-insured property is inside or outside the SFHA. Column (2) of exhibit 3.19 shows that the relative 

likelihood of defaulting the next year is approximately 1.8 times larger when an FHA-insured property 

has at least one flood insurance claim in a year than when it has no flood insurance claims. The result is 

statistically significant at a 95-percent confidence level. However, the SFHA status of an FHA-insured 

property does not have a statistically significant impact on the relative likelihood of defaulting the next 

year. 

The third column of the exhibits control for adjusted monthly income and mortgage payment 

separately. In exhibit 3.19 the relative likelihood of defaulting the next year for FHA-insured properties 

in North Carolina is larger and statistically significant at 90 percent confidence level when an FHAinsured property has at least one flood insurance claim in a year than when it has no flood insurance 

claims in a year. Columns (1) to (3) of exhibit 3.19 show that this result holds even when controlling for 

additional factors such as SFHA status, monthly mortgage payment, and adjusted monthly effective 

income. Among the additional controls, monthly mortgage payment and monthly effective income 

exhibit a statistically significant relationship with the relative likelihood of defaulting in the next year. 

The result of interest in columns (1) to (3) of exhibits 3.19 and 3.20 is the effect of having at least one 

flood insurance claim in a year on the relative likelihood of the FHA-insured property defaulting in the 

next year. To investigate whether this relationship persists over a longer time lag, columns (4) to (6) of 

exhibits 3.19 and 3.20 examine the effect of having at least one flood insurance claim in the previous 

year on the relative likelihood of default in the next year (in other words, 2 years after the year of the 

flood insurance claim). Column (6) shows that when controlling for SFHA status, mortgage payment, and
Flood Insurance Coverage of Federal Housing Administration Single-Family Homes | 36

monthly income, having at least one flood insurance claim in a year is associated with an increase in the 

relative likelihood of default 2 years in the future. This result is statistically significant at 90 percent 

confidence level. Column (6) of exhibit 3.19 shows that the relative likelihood of default in a year is 2.09

times larger when an FHA-insured property has at least one flood insurance claim 2 years prior than 

when it has no flood insurance claims. 

Exhibit 3.20 presents the results of the logistic regression model for Florida. Column (1) in exhibit 3.20

shows that the relative likelihood of defaulting in the next year is 1.4 times larger when an FHA-insured 

property that has at least one claim in the current year than when it has no claims in the current year. 

Exhibit 3.20 | Florida: Flood Insurance Claims and Loan Performance

Florida

Dependent Variable: Loan Performance (= 1 if FHA property defaults in t+1, 0 otherwise) 

(1) (2) (3) (4) (5) (6) 

At least one claim in t 1.416*** 1.388*** 1.420*** 

At least one claim in t-1 1.016 0.999 1.004 

SFHA status 1.149*** 1.096*** 1.127*** 1.089*** 

Monthly mortgage 

payment (logs) 2.521*** 2.302  

Adjusted monthly effective 

income (logs) 0.527** * 0.574*** 

Year fixed effects Yes Yes Yes Yes Yes Yes

Constant 0.0310*** 0.0299*** 0.0085*** 0.0312*** 0.0302*** 0.0081*** 

No. of observations 350,253 350,253 319,535 252,398 252,398 230,229 

FHA = Federal Housing Administration. SFHA = Special Flood Hazard Area.

Notes: The symbols ***, **, and * represent significance values of p ≤ 0.01, p ≤ 0.05, and p ≤ 0.1, respectively.

This result persists even when accounting for the SFHA status of the property, the monthly mortgage 

payments on the FHA-insured property, and the adjusted monthly effective income of the borrower

(column [2-3]). Unlike North Carolina, in Florida, the SFHA status of the property has a statistically 

significant impact on the relative likelihood of default in the next year. The relative likelihood of default 

in the next year is 1.1 times larger when the FHA-insured property is inside the SFHA than when it is 

outside the SFHA. This result is statistically significant at a 99-percent confidence level. 

Columns (4) to (6) of exhibit 3.20 examine the effect of having at least one flood insurance claim in the 

previous year on the relative likelihood of default in the next year (in other words, 2 years after the year 

of the flood insurance claim). Columns (4) through (6) of exhibit 3.20 show that for Florida, having a 

flood insurance claim in a year does not have a statistically significant relationship with the relative 

likelihood of default 2 years after the year of the claim. 

In summary, for both North Carolina and Florida, the relative likelihood of defaulting in the next year is 

larger when an FHA-insured property has at least one flood insurance claim in the current year than 

when the FHA-insured property has no flood insurance claims in the current year. This result is 

statistically significant at a 90 percent confidence level. The result holds even when controlling for

factors such as SFHA status, monthly mortgage payment, and monthly effective income of the borrower. 

However, the results for North Carolina and Florida differ when investigating whether the impact of a 

flood insurance claim on the likelihood of default persists over a longer time lag. For North Carolina, 

having a claim in a given year has a statistically significant relationship with the relative likelihood of 

default 2 years after the year of the claim. In Florida, this relationship is not statistically significant.
Flood Insurance Coverage of Federal Housing Administration Single-Family Homes | 37

The analysis presented in exhibits 3.19 and 3.20 above is restricted to FHA-insured properties with 

active flood insurance policies. In addition to mortgage payments, borrowers with FHA-insured 

mortgages that have active flood insurance policies also make flood insurance premium payments. The 

study team investigated the relationship between flood insurance premiums and loan performance of 

the FHA-insured property. The results of the analysis are presented in exhibits 3.21 and 3.23 below. 

Exhibit 3.21 presents the results for North Carolina. The first column of exhibit 3.21 shows that the 

relative likelihood of default in the next year is 1.3 times larger for a 1 percent higher flood insurance 

premium. The relationship is statistically significant at a 99-percent confidence level. The magnitude of 

this positive association between flood insurance premium and default in the next period remains stable 

even when accounting for other factors such as the SFHA status of the FHA-insured property, whether a 

flood insurance claim was made in the current year, the mortgage payment and the adjusted monthly 

effective income of the borrower. The result is statistically significant at a 95-percent confidence level. 

In column (6) of exhibit 3.21, when accounting for monthly effective income, monthly mortgage 

payment, and flood insurance premium amount, the relationship between having a claim in the current 

year and a default event in the next year is statistically significant at a 90-percent confidence level. 

Exhibit 3.21 | North Carolina: Flood Insurance Premiums and Loan Performance

 

North Carolina

Dependent Variable: Loan Performance (= 1 if FHA property defaults in t+1, 0 otherwise) 

1 2 3 4 5 6 

Premium amount (logs) 1.264*** 1.251*** 1.232** 1.242** 1.222** 1.222** 

At least one claim in t 1.746** 1.793** 1.538 1.585* 

SFHA status 1.035 1.023 1.009 0.991 0.982 

Monthly mortgage 

payment (logs) 0.91 1.781*** 

Adjusted monthly 

effective income (logs) 0.641*** 0.476*** 

Year fixed effects Yes Yes Yes Yes Yes Yes

Constant 0.00561*** 0.00591*** 0.00633*** 0.0111*** 0.216 0.0456** 

No. of observations 15,450 15,450 15,450 15,046 13,342 13,334 

FHA = Federal Housing Administration. SFHA = Special Flood Hazard Area.

Notes: The symbols ***, **, and * represent significance values of p ≤ 0.01, p ≤ 0.05, and p ≤ 0.1, respectively.

The results presented in exhibit 3.21 do not establish a causal relationship between flood insurance 

premium amount and the event of default in the next year. They do indicate that further investigation is 

required in the manner in which flood insurance is set and whether and how this impacts the likelihood 

of default. The study team also investigated whether a default event in the next year is associated with a 

change in the flood insurance premium (from the current year to the next year). In North Carolina, there 

were a total of 359 default events of FHA-insured properties with active flood insurance policies. Of 

these, 78 percent had a premium change. Details are provided in exhibit 3.22 below. The number of 

FHA-insured properties is too few for reliable regression estimates to be estimated; however, for 

reference, the results of the logistic regression model analyzing the relationship between percent 

change in premium amounts and loan performance are presented in exhibit C.13 in appendix C. The 

relationship between flood insurance premium change and default event for FHA-insured properties in 

North Carolina is not statistically significant.
Flood Insurance Coverage of Federal Housing Administration Single-Family Homes | 38

Exhibit 3.22 | North Carolina: Premium Change and Default Event

Number of 

properties

Percent of 

properties

Number of properties that had a premium change in the next

year (between t and t+1) 280 78

Number of properties that did not have a premium change in 

the current year (between t and t+1) 79 22

Total number of FHA-insured properties with active flood 

insurance policies that defaulted in the next year (t+1) 359 100

FHA = Federal Housing Administration.

Exhibit 3.23 presents the results of the analysis of the relationship between flood insurance premiums 

and loan performance for FHA-insured properties in Florida. Unlike North Carolina, in the case of Florida, 

the relationship between flood insurance premium amounts paid and the relative likelihood of default is 

not statistically significant. However, columns (4) through (6) of exhibit 3.23 show that when accounting 

for flood insurance premium amounts, the relationship between having a flood insurance claim in the 

current year and a default event in the next year is statistically significant at a 99-percent confidence 

level. The relative likelihood of default in the next year is 1.4 times larger for an FHA-insured property 

with a flood insurance claim in the current year than for an FHA-insured property without a flood 

insurance claim in the current year when accounting for the premium amount paid, flood zone status of 

the FHA-insured property, mortgage payment and income.

Exhibit 3.23 | Florida: Flood Insurance Premiums and Loan Performance

 

Florida

Dependent Variable: Loan Performance (= 1 if FHA property defaults in t+1, 0 otherwise) 

1 2 3 4 5 6 

Premium amount 

(logs) 1.025 0.988 0.985 0.975 0.988 1.007 

At least one claim in 

t 1.395*** 1.436*** 1.386*** 1.417*** 

SFHA status 1.152*** 1.152*** 1.149*** 1.133*** 1.095*** 

Monthly mortgage 

payment (logs) 1.448*** 2.522*** 

Adjusted monthly 

effective income 

(logs)

 0.905*** 0.527*** 

Year fixed effects Yes Yes Yes Yes Yes Yes

Constant 0.0268*** 0.0321*** 0.0326*** 0.00236*** 0.0742*** 0.00817*** 

No. of observations 350,251 350,251 350,251 346,370 319,665 319,533 

FHA = Federal Housing Administration. SFHA = Special Flood Hazard Area.

Notes: The symbols ***, **, and * represent significance values of p ≤ 0.01, p ≤ 0.05, and p ≤ 0.1, respectively.

The study team also investigated the relationship between a change in the flood insurance premium and 

default event in the next year for FHA-insured properties in Florida. Exhibit 3.24 shows that of the total 

number of FHA-insured properties with active flood insurance policies that defaulted, 75 percent

experienced a premium change. Results of the logistic regression analyzing the relationship between 

flood insurance premium change and default events are presented in exhibit C.14 in appendix C. The 

result is statistically significant at a 99-percent confidence level. However, the estimate is equal to 1, 

implying that the relative likelihood of defaulting in the next year is the same for FHA-insured properties 
Flood Insurance Coverage of Federal Housing Administration Single-Family Homes | 39

whose flood insurance premium changed compared to FHA-insured properties whose flood insurance 

premium did not change. 

Exhibit 3.24 | Florida: Premium Change and Default Event

Number of 

properties

Percent of 

properties

Number of properties that had a premium change in the current year 

(between t and t+1) 7,578 75%

Number of properties that did not have a premium change (between 

t and t+1) 2,561 25%

Total number of FHA-insured properties with active flood insurance 

policies that defaulted in the next year (t+1) 10,139 100%

FHA = Federal Housing Administration.
Flood Insurance Coverage of Federal Housing Administration Single-Family Homes | 40

4 SUMMARY AND CONCLUSIONS 

In a time of increasing flood and flood-related disaster risk, HUD seeks to understand the exposure of its 

asset portfolios to flood risk and the extent to which homeowners with homes in SFHA’s carry the 

requisite flood insurance policies. Consequently, the overarching objective of this study was to better 

understand the flood risk exposure of FHA single-family homes and compliance with flood insurance 

requirements. Using data from HUD’s FHA single-family property database, the Federal Emergency 

Management Agency’s (FEMA) property-level National Flood Insurance Program (NFIP) database, and 

FEMA’s Special Flood Hazard Area (SFHA) status, this study provides information to support HUD’s 

efforts to prudently manage its portfolio. This chapter highlights the key findings of the study, discusses 

the limitations of the study, and identifies topics for additional research.

Summary of the Findings

The findings from this study fall into three categories based on the study’s objectives: (1) extent of flood 

risk to FHA single-family properties; (2) extent of properties with FHA-insured mortgages in compliance 

with the requirement to carry flood insurance; and (3) relationship between NFIP claims, insurance 

coverage, and FHA loan performance. 

EXTENT OF FLOOD RISK FOR FEDERAL HOUSING ADMINISTRATION SINGLE-FAMILY PROPERTIES

In addressing this objective, the study team examined the number of FHA single-family properties inside 

and outside SFHAs; the number of FHA single-family properties within 600 meters of an SFHA; annual 

changes in the number of FHA single-family properties located within an SFHA; and the number of 

nonperforming loan properties inside and outside an SFHA, by year. Our results indicated that the 

proportion of properties with FHA-insured mortgages inside SFHAs in both North Carolina and Florida 

was relatively small compared to the proportion outside of SFHAs, although exposure to flood risk in 

2019 was much higher in Florida (approximately 20 percent) than in North Carolina (approximately 5 

percent). In both Florida and North Carolina, properties with FHA-insured mortgages inside an SFHA 

were mostly in zone A areas, which have a lower level of risk than zone V. It is important to note,

however, that the proportion of properties with FHA-insured mortgages in both Florida and North 

Carolina that are within 600 meters of an SFHA was much larger than the proportion that was inside an 

SFHA in 2019. Approximately 80 percent and approximately 54 percent of properties with FHA-insured 

mortgages in Florida and North Carolina, respectively, were within 600 meters of SFHAs. Regarding

annual changes in the number of properties inside an SFHA, our estimates indicate that both North 

Carolina and Florida experienced dramatic increases in the total number of active mortgages for 2011 

through 2019. The proportion of properties inside an SFHA or within 600 meters of an SFHA, however, 

remained relatively stable during this time. Our findings on loan performance inside and outside of an 

SFHA indicated similar default rates for properties inside and outside SFHAs in most years. It is 

important to note, however, that the default rates appeared much higher for Florida and North Carolina 

in 2017 and 2018 respectively, which can be attributed mainly to two major hurricanes that caused 

extensive flooding and wind damage in these states: Hurricane Irma in Florida in 2017 and Hurricane 

Florence in North Carolina in 2018.
Flood Insurance Coverage of Federal Housing Administration Single-Family Homes | 41

EXTENT OF FEDERAL HOUSING ADMINISTRATION PROPERTIES IN COMPLIANCE WITH REQUIREMENT TO 

CARRY FLOOD INSURANCE

Dixon et al. (2006) estimated that approximately 50 to 60 percent of single-family homes in SFHAs are 

subject to the mandatory purchase requirement. Of the homes subject to the mandatory purchase 

requirement, Dixon et al. (2006) estimated approximately 78 percent compliance in the country as a 

whole, with minor geographical variations. In this study, we presented the results for flood insurance 

coverage rates under two different methods—moderate and conservative28—of classifying FHA-insured 

properties as being inside or outside an SFHA. Generally, on an average (of all years and under both 

flood zone status classifications), the flood insurance coverage rate was significantly larger for 

properties with FHA-insured mortgages inside an SFHA (approximately 37 percent in North Carolina and 

approximately 59 percent in Florida) than for those outside an SFHA (approximately 1 percent in North 

Carolina and approximately 11 percent in Florida). Our results further revealed variation in estimated 

compliance rates across the two study states and by flood status classification method. In both states, 

the flood insurance coverage rate for FHA-insured properties inside an SFHA was larger under the 

conservative method than under the moderate method. In North Carolina, the conservative estimate for 

compliance rates ranged from approximately 48 percent to approximately 55 percent, compared to

estimates under the moderate method which ranged from approximately 21 percent to approximately 

24 percent. Similarly, in Florida, the compliance rate for properties with FHA-insured mortgages inside 

an SFHA ranged from approximately 65 percent to approximately 69 percent under the conservative 

method, while the moderate estimate ranged from approximately 47 percent to approximately 54 

percent. It is important to note that this analysis may not capture the entire picture. A property located 

inside an SFHA may not require flood insurance due to property improvements, such as elevation. As 

such, the property would be in compliance with FHA’s regulations without carrying flood insurance.

The study team also examined annual changes in FHA-insured properties with active flood insurance 

policies from 2011 through 2019. We found that the percentage of FHA-insured properties with active 

flood insurance policies, for properties inside an SFHA and overall, grew over time for both Florida and 

North Carolina, but at a decreasing rate. In particular, the two states experienced substantial growth in 

the number of FHA-insured properties in 2011 through 2012 for all FHA properties and for properties 

inside an SFHA. We also examined the factors driving the annual changes in the number of properties 

with FHA-insured mortgages by analyzing the flood insurance policy take-up rate and policy drop rate. 

For flood insurance policy take-up rates, our estimates indicated a relatively faster-growing trend, on 

average, for all FHA-insured properties compared to the trend for FHA-insured properties inside an SFHA 

in North Carolina. The flood insurance policy take-up rates in Florida fluctuated over time; however, the 

take-up rates for all FHA-insured properties were higher than the rates for the FHA-insured properties 

inside an SFHA. This fact was likely due to the requirement for properties with FHA-insured mortgages in 

SFHA to have flood insurance at sale closing. In addition, the flood insurance policy drop rates 

consistently decreased from 2012 through 2019 for all FHA-insured properties and for FHA-insured 

properties inside an SFHA in North Carolina. The FHA-insured properties inside an SFHA in Florida 

28 The moderate method uses the inaccurate latitude and longitude coordinates to determine SFHA status, and assumes 

properties are within SFHAs if their parcels intersect with SFHAs. Under the conservative method, any FHA-insured properties 

with inaccurate latitude and longitude coordinates are classified as being outside the SFHA. In addition, FHA insured properties 

are considered to be outside the SFHA if their parcels intersect with SFHAs, but the building footprints do not.
Flood Insurance Coverage of Federal Housing Administration Single-Family Homes | 42

showed a decreasing trend similar to that in North Carolina. The study team also examined FHA singlefamily properties that had flood insurance continuously. Our estimates indicated that Florida had a 

much larger percentage of all FHA properties that were insured continuously compared to North 

Carolina. However, this share in Florida decreased slightly from 2011 through 2019, while the share in 

North Carolina remained constant across all years. Meanwhile, the proportion of FHA-insured properties 

inside an SFHA that were continuously insured slightly increased for both North Carolina and Florida.

RELATIONSHIP BETWEEN FLOOD INSURANCE COVERAGE STATUS, NATIONAL FLOOD INSURANCE 

PROGRAM CLAIMS, AND FEDERAL HOUSING ADMINISTRATION LOAN PERFORMANCE

The final aspect of the analysis explored the relationship between flood insurance coverage status, NFIP 

claims, and FHA loan performance. In conducting this exploration, we first explored the relationship 

between the next-year default rate of FHA-insured single-family properties by flood insurance coverage 

and SFHA status. We calculated the default rate as the share of FHA-insured properties inside the SFHA 

with flood insurance coverage in the current year that default in the next year. Generally, our results 

show that flood insurance coverage does not significantly matter when determining default rates for 

FHA-insured properties inside or outside an SFHA. On average (of all years), the difference between the 

next year default rate of FHA-insured properties with flood insurance in the current year and of those 

without flood insurance in the current year, irrespective of flood zone status, was less than 0.5 

percentage points in both Florida and North Carolina. It is important to note, however, that the average 

next year default rate is highest for FHA-insured properties inside the SFHA with flood insurance 

coverage in the current year (average of 3.21 percent in Florida and average of 2.61 percent in North 

Carolina). 

We also examined the average number of claims per policy year for all flood-insured FHA single-family 

properties and for those inside SFHA. We calculated claim rates as the share of flood-insured FHAinsured properties that made at least one claim in that year. Our estimates indicate low claim rates for 

all FHA-insured properties for both North Carolina and Florida in most years. Unusually high claim rates, 

however, were observed in 2011, 2016, and 2018 for North Carolina, and in 2017 for Florida. Preliminary 

research on this phenomenon suggested that strong hurricanes were the major contributors to high 

claim rates in those years. For example, the high claim rate in Florida in 2017 corresponded to the 

occurrence of Hurricane Irma in 2017. The results also indicate that FHA-insured properties inside an 

SFHA were slightly more likely to file claims in both Florida and North Carolina. On average (of all years), 

the claim rates for FHA-insured properties in an SFHA were 0.2 percentage points and 3.3 percentage 

points higher than the claim rates for FHA-insured properties outside an SFHA in Florida and North 

Carolina, respectively.

Finally, using a logistic regression model, the study team explored the relationship between flood 

insurance claims, flood insurance premiums, and loan performance. More specifically, we analyzed the 

effect of a flood insurance claim and premium amounts on loan performance of the FHA-insured 

property, accounting for the SFHA status of the FHA-insured mortgage, the monthly mortgage payment 

on the FHA-insured property, the monthly effective income of the borrower, and the ratio of the 

monthly mortgage payment to monthly effective income. Our measure of loan performance is a dummy 

variable indicating the first time an FHA-insured mortgage is in default. Our results differ in the two 

states. In North Carolina, the logistic regression models consistently show that higher flood insurance 

premium amounts increase the likelihood of defaulting in the next year. The odds of defaulting in the 

next year are also higher if an FHA-insured property in North Carolina has a flood insurance claim, but 
Flood Insurance Coverage of Federal Housing Administration Single-Family Homes | 43

only in models that do not account for monthly effective income. Also, there is some evidence that FHAinsured properties in North Carolina that defaulted experienced a premium change (78 percent of 

properties that defaulted experienced a premium change). In Florida, the logistic regression models 

consistently show that having a flood insurance claim increases the odds of defaulting in the next year, 

while the premium amount has no statistical relationship with the odds of defaulting. Similar to North 

Carolina, most properties that defaulted did experience a premium change (75 percent). In both states, 

having a flood insurance claim in the previous year did not matter as much as having a flood insurance 

claim in the current year for the likelihood of defaulting in the next year. 

Premiums mattering more in North Carolina may be due to the fact that flood insurance is generally 

more expensive in North Carolina (see exhibit 3.10), especially inside an SFHA. Therefore, higher 

premium amounts may place more burden on homeowners in North Carolina than in Florida. 

Regardless, there is clear evidence that flood insurance expenses, either a premium change, premium 

amount, or having a claim, are associated with an increased likelihood of default for FHA-insured 

properties. 

Limitations and Further Work 

There are three main data limitations of this study. First, the study is limited to two states and should, 

therefore, be considered as a pilot study. However, the research team gained a lot of knowledge in 

working with the data that is transferable to HUD and other researchers that will make studies of more 

states or even of the entire country much easier than before this pilot. Second, the determination of 

FHA properties being in/out of the SFHA relies on the latest SFHA geographic definition. To the extent 

that the boundaries change over time, the findings may be different using temporally consistent 

boundary files. However, our analysis of the potential changes in the boundary demonstrated that this 

was a minor consideration for these two states. It could be more significant in other areas. Third, the

study relied on address matching to determine if FHA properties have flood insurance. Finding a way to 

avoid address matching would likely increase the accuracy of the analysis. One possibility would be to 

capture some type of NFIP policy number along with other closing information on the FHA data. This 

would make analyses of drop rates and claims much easier and more accurate. For properties in the 

SFHA, presumably, this would be relatively easy as flood insurance is required for closing. For other 

properties, there would need to be an administrative link between FHA and FEMA to facilitate the 

tracking of insurance. 

There are also several open questions that the limited analysis in this report did not answer. First, the 

present study does not investigate how the flood risk exposure of FHA-insured properties compares to 

other properties. Although results from this study provide insight into the extent of flood risk FHA’s 

portfolio is facing, it is important to place such analysis into context to capture a more complete picture 

of the extent of the risk. Depending on data availability, future research could help generate a better 

understanding of the extent of the risk by comparing FHA rates of properties in SFHAs with national 

trends, government-sponsored enterprises (GSEs), and conventional mortgages. This will create the 

basis to compare FHA risk and that of the broader market. 

Similarly, the current study has focused mainly on the loan performance of FHA-insured properties. 

While we included the findings from the General Accounting Office (GAO) reports on this topic, which 

showed even lower rates historically, future research could extend this analysis by comparing loan 
Flood Insurance Coverage of Federal Housing Administration Single-Family Homes | 44

performance of FHA-insured properties to the performance of other non-FHA mortgages inside an SFHA, 

such as the GSEs or the Mortgage Bankers Association (or other national groups). 

Third, the report does not fully explain why default rates are so similar, and in fact slightly higher, for 

FHA-insured properties with flood insurance in an SFHA when compared to FHA-insured properties in an 

SFHA without flood insurance. The logistic regression results suggest that flood insurance premium 

amounts, changes in the flood insurance premium, and having a flood insurance claim are positively 

associated with the likelihood of default. It may be the case that flood insurance does not adequately 

cover the cost of damages or that resulting increases in premiums are too burdensome for 

homeowners. Future work could examine default rates of FHA-insured properties with and without 

flood insurance before and after a major flooding event to investigate this issue further. 

Fourth, although this report estimates the number and percentage of FHA-insured properties that are 

within an SFHA and have flood insurance, it is unclear how many of these properties are truly not 

compliant with the requirement to carry flood insurance. Future research could work to obtain more 

detailed data on elevation, changes in SFHA boundaries over time, and other factors that may impact 

the requirement to have flood insurance. Likely, completing these analyses is more feasible at a smaller 

geographic level (such as a single county or metropolitan area) to increase the ease of accessing more 

detailed data. An ideal candidate for this work should have evidence of significant changes in the SFHA 

boundary since SFHA status is a major factor impacting a homeowner’s decision to purchase flood 

insurance. 

Finally, while the analysis focused on SFHA as a risk indicator, it may be beneficial in the future to 

examine areas outside of the 100-year flood plain that are impacted by floods and may still be at risk. As 

this study has shown, while the SFHA boundary is small and only contains a few FHA-insured properties, 

several other FHA-insured properties are located within a 600-meter buffer of the SFHA boundary. One 

broad risk to the FHA portfolio is that floods are impacting areas outside of SFHAs, but the regulatory 

requirements (including requirements to have flood insurance) do not cover these homes in the 500-

year flood plain. However, the risk of flooding is still higher in the 500-year flood plain than outside of a 

flood plain.

29 Consequently, future analysis may involve analysis of risk and performance in the 500-year 

flood plain as well. This is relevant because the results may impact policies regarding flood insurance 

requirements. 

29 Almost three-quarters of the more than 204,000 homes and apartment buildings in Harris County, Texas, that were damaged 

by Hurricane Harvey were outside the federally regulated 100-year flood plain. 

https://www.houstonchronicle.com/news/article/In-Harvey-s-deluge-most-damaged-homes-were-12794820.php. 
Flood Insurance Coverage of Federal Housing Administration Single-Family Homes | 45

APPENDIX A: DETAILS OF THE DATA 

MERGING PROCESS

In order to conduct the analysis for research objective 2, the study team needed to merge three 

separate datasets: the Federal Housing Administration (FHA) property data, the flood insurance policy 

data from the National Flood Insurance Program (NFIP), and the flood insurance claim data. Details of 

the merge exercise are provided below. 

MERGING THE FEDERAL HOUSING ADMINISTRATION PROPERTY DATA AND THE NATIONAL FLOOD 

INSURANCE PROGRAM POLICY DATA

The study team undertook the merge between the FHA property data and NFIP policy data using the 

address fields available in both datasets. In total, the study team was able to merge 202,081 properties 

with FHA-insured mortgages in Florida and 9,432 properties with FHA-insured mortgages in North 

Carolina with the NFIP policy data. This accounts for 30 percent of all properties with FHA-insured 

mortgages in Florida and 4 percent of all properties with FHA-insured mortgages in North Carolina. 

In the FHA property data, the case number variable uniquely identifies each application for a specific 

property’s mortgage insurance. The study team anticipated that the same property could be listed 

under different case numbers if there were different applications for mortgage insurance on the 

property. This situation could arise if property ownership changed, resulting in multiple entries for the 

same property in the FHA data. The study team undertook the merge of the FHA property data with the 

NFIP data by creating a list of addresses present in both files and merging them. Then, FHA case 

numbers were matched to an NFIP policy if both shared an address and were active in the same year. If 

an address had more than one NFIP policy in a single year, the policy information we use in the analysis

was aggregated (for example, the total number of claims in a year for property across all NFIP policies).

The merge between the FHA property-level data and the NFIP policy data was undertaken in four

rounds, with different combinations of location and address variables used in each round. In the first 

round, the study team used the latitude and longitude coordinates provided in each file (in some cases 

the study team re-geocoded addresses; see approach to research objective 1 above) to map addresses 

to parcels. If an FHA address and NFIP address shared the same parcel, they were merged together. As 

discussed in the methods section on the approach to research objective 1 above, several properties had 

unreliable latitude and longitude coordinates. Any property the study team identified as having 

unreliable latitude and longitude coordinates were not matched to the parcel. For these remaining 

addresses, the study team merged on address names. This process resulted in 103,220 properties with 

FHA-insured mortgages in Florida and 4,104 properties with FHA-insured mortgages in North Carolina 

being merged to the NFIP policy data. 

After matching addresses with reliable latitude and longitudes based on parcel information, the study 

team performed standardizations on the city variable in the remaining unmatched addresses in the NFIP 

policy data by removing phrases such as “TOWN OF” or “CITY OF” and leaving only the city name. The 

second-round merge between the FHA and NFIP policy data was then undertaken using the street 

address, ZIP Code, and standardized city name variables. The study team created a list of the unique 

combinations of address, ZIP Code, and standardized city name from both files and merged them using a 
Flood Insurance Coverage of Federal Housing Administration Single-Family Homes | 46

one-to-one merge. This process resulted in 46,138 FHA-insured properties in Florida and 2,641 FHAinsured properties in North Carolina being merged with the NFIP policy data. 

The study team found that several addresses in the NFIP policy data were missing city names. The thirdround merge was between the FHA and NFIP policy data that were unmerged in the first and second 

rounds. The third-round merge was undertaken using the address line and ZIP Code variables only. The 

study team created a list of the unique combinations of addresses and ZIP Codes from both files and 

merged them together using a one-to-one merge. This process resulted in a larger number of merges 

than the second round, for both Florida and North Carolina. In Florida, 51,753 FHA properties were 

merged with the NFIP policy data, and in North Carolina, 2,674 FHA properties were merged with the 

NFIP policy data. 

Exhibit A.1 | Data Merge of Properties with Federal Housing Administration-Insured Mortgages with 

National Flood Insurance Program Policy Data

Merge by Florida North Carolina 

Merged FHA properties

parcel information 103,150 4,104

zip-city-street address 46,138 2,641

zip-street address 51,057 2,640

standardized street address 1,736 47

Total FHA properties merged 202,081 9,432

Total FHA properties (N) 668,599 247,343

FHA = Federal Housing Administration. 

The final round merge was undertaken using the remaining FHA and NFIP policy data. In both datasets, 

the study team performed standardizations using the address line variable, by removing street suffixes 

such as “LN,” “DR,” and “CIR” and leaving the house number and street name. The study team created a 

list of the unique combinations of the standardized addresses and ZIP Codes from both files and merged 

them using a one-to-one merge. This process resulted in 970 FHA-insured properties being merged in 

Florida and 13 FHA-insured properties being merged in North Carolina. 

MERGING THE NATIONAL FLOOD INSURANCE PROGRAM POLICY DATA AND THE NFIP CLAIMS DATA

The data on flood insurance policies and claims were provided to the study team as two separate files. 

In order to tabulate the average number of claims per policy year for all flood-insured FHA single-family 

properties, the study team undertook the merge of the policy data with the flood insurance claims data. 

To merge the policy data with the claims data, the study team used a combination of address variables 

(ZIP Code, street address, and city), and the start year of the policy. The study team anticipated the 

possibility of multiple claims made against a single flood insurance policy. The first step in the merge 

exercise was to keep only those policies that were unique in address, policy premium, policy start, and 

policy end date combinations. After dropping duplicates, the team retained 99.8 percent of the policies 

in Florida and 99.9 percent of the policies in North Carolina. The address variables, policy premium, 

policy start, and policy end date variables were used to merge the policy data with the claims data using 

the one-to-many merge. Similarly, 99.9 percent of claims in Florida and 99.9 percent of claims in North 

Carolina were matched to flood insurance policies. The next step was to merge the policy claims data to 

FHA policy data using a unique identity variable generated as a combination of the ZIP Code, address, 

policy start dates, and policy end dates in a many-to-one merge. 
Flood Insurance Coverage of Federal Housing Administration Single-Family Homes | 47

APPENDIX B: GENERAL FEDERAL 

EMERGENCY MANAGEMENT AGENCY

TERMS

Exhibit B.1 | Federal Emergency Management Agency Terms and Definitions

FEMA Term Definition

BFE 

Base Flood Elevation. Computed elevation to which flood waters are anticipated to rise 

during the base year (1 percent annual probability, also called 100-year flood) flood 

event. These elevations are rounded to the nearest whole foot. The relationship 

between the BFE and the structure’s elevation determines flood insurance premiums.

FHA Federal Housing Administration. Provides mortgage insurance on loans made by FHAapproved lenders. 

Fill Earthen fill is sometimes placed in an SFHA to reduce flood risk to the filled area.

FIRM Flood Insurance Rate Map.

Floodway

Regulatory floodway, channel, or river and adjacent land that must be reserved in 

order to discharge the base flood without raising water surface elevation above its 

designated height.

LOMA Letter of Map Amendment. Subset of LOMC.

LOMC Letter of Map Change. A letter that reflects an official change to a FIRM that is in 

effect.

LOMR Letter of Map Revision. Subset of LOMC. 

MFHA Moderate Flood Hazard Area. Area that has between 0.2 percent and 1 percent annual 

risk of flood event. Also known as 500-year flood area.

MinFHA Minimal Flood Hazard Area. Area that has less than a 0.2 percent annual risk of flood 

event. 

MSC Map Service Center.

NFIP 

National Flood Insurance Program. For public/private structures. Congress mandated 

federally regulated or insured lenders to require flood insurance or mortgaged 

properties in locations of high flood probability. 

SFHA Special Flood Hazard Area. Area that has an annual, less-than-or-equal-to 1 percent 

risk of flood event. Also known as a 100-year flood area.
Flood Insurance Coverage of Federal Housing Administration Single-Family Homes | 48

Exhibit B.2 | Definitions of Federal Emergency Management Agency Flood Zone Designations

SFHA Zone Definition

A 

Areas subject to inundation by the 1 percent-annual-chance flood event, generally 

determined using approximate methodologies. Because detailed hydraulic analyses 

have not been performed, no BFEs or flood depths are shown. Mandatory flood 

insurance purchase requirements and floodplain management standards apply.

AO

Areas subject to inundation by 1 percent-annual-chance shallow flooding (usually 

sheet flow on sloping terrain), in which average depths are between 1 and 3 feet. 

Average flood depths derived from detailed hydraulic analyses are shown in this zone. 

Mandatory flood insurance purchase requirements and floodplain management 

standards apply. Some AO zones have been designated in areas with high flood 

velocities such as alluvial fans and washes. 

AH

Areas subject to inundation by 1 percent-annual-chance shallow flooding (usually areas 

of ponding), where average depths are between 1 and 3 feet. BFEs derived from 

detailed hydraulic analyses are shown in this zone. Mandatory flood insurance 

purchase requirements and floodplain management standards apply.

A1–A30

Areas subject to inundation by the 1 percent-annual-chance flood event determined by 

detailed methods. BFEs are shown. Mandatory flood insurance purchase requirements 

and floodplain management standards apply.

AE

Areas subject to inundation by the 1 percent-annual-chance flood event determined by 

detailed methods. BFEs are shown. Mandatory flood insurance purchase requirements 

and floodplain management standards apply.

A99

Areas subject to inundation by the 1 percent-annual-chance flood event but that will 

ultimately be protected upon completion of an under-construction federal flood 

protection system. These are areas of special flood hazard where enough progress has 

been made on the construction of a protection system (such as dikes, dams, and 

levees) to consider it complete for insurance rating purposes. Zone A99 may only be 

used when the flood protection system has reached specified statutory progress 

toward completion. No BFEs or depths are shown. Mandatory flood insurance 

purchase requirements and floodplain management standards apply.

AR

Areas that result from the decertification of a previously accredited flood protection 

system that is determined to be in the process of being restored to provide base flood 

protection. Mandatory flood insurance purchase requirements and floodplain 

management standards apply.

V 

Areas along coasts subject to inundation by the 1 percent-annual-chance flood event 

with additional hazards associated with storm-induced waves. Because detailed 

hydraulic analyses have not been performed, no BFEs or flood depths are shown. 

Mandatory flood insurance purchase requirements and floodplain management 

standards apply.

VE

Areas subject to inundation by the 1 percent-annual-chance flood event with 

additional hazards due to storm-induced velocity wave action. BFEs derived from 

detailed hydraulic analyses are shown. Mandatory flood insurance purchase 

requirements and floodplain management standards apply.

V1-V30

Areas subject to inundation by the 1 percent-annual-chance flood event with 

additional hazards due to storm-induced velocity wave action. BFEs derived from 

detailed hydraulic analyses are shown. Mandatory flood insurance purchase 

requirements and floodplain management standards apply.
Flood Insurance Coverage of Federal Housing Administration Single-Family Homes | 49

APPENDIX C: ADDITIONAL EXHIBITS

Exhibit C.1 | North Carolina: Federal Housing Administration-Insured Single-Family Properties with 

Flood Insurance 

Year 

Moderate Definition of SFHA Conservative Definition of SFHA

Total Inside SFHA Outside 

SFHA Total Inside SFHA Outside SFHA

2011 586 308 278 586 235 276

2012 1,232 632 600 1,232 492 597

2013 1,780 900 880 1,780 695 875

2014 1,879 970 909 1,879 760 904

2015 2,307 1,217 1,090 2,307 969 1,084

2016 2,559 1,406 1,153 2,559 1,121 1,147

2017 3,049 1,584 1,465 3,049 1,274 1,456

2018 3,620 1,800 1,820 3,620 1,450 1,806

2019 3,978 1,912 2,066 3,978 1,544 2,040

SFHA = Special Flood Hazard Area.

Exhibit C.2 | Florida: Federal Housing Administration-Insured Single-Family Properties with Flood 

Insurance 

Year

Moderate Definition of SFHA Conservative Definition of SFHA

Total Inside SFHA Outside 

SFHA Total Inside SFHA Outside SFHA

2011 14,391 6,690 7,701 14,391 5,175 7,635

2012 28,538 13,683 14,855 28,538 10,619 14,742

2013 42,036 20,662 21,374 42,036 16,089 21,193

2014 49,721 25,534 24,187 49,721 20,239 23,972

2015 57,746 32,561 25,185 57,746 26,693 24,941

2016 58,859 37,492 21,367 58,859 31,872 21,181

2017 65,268 42,201 23,067 65,268 36,291 22,842

2018 69,620 45,952 23,668 69,620 39,875 23,414

2019 68,023 47,276 20,747 68,023 41,590 20,421

SFHA = Special Flood Hazard Area.
Flood Insurance Coverage of Federal Housing Administration Single-Family Homes | 50

Exhibit C.3 | Policy Take-Up Rate by Year for North Carolina and Florida for all Federal Housing 

Administration-Insured Single-Family Properties and for Properties within a Special Flood Hazard 

Area, 2011–2019

Year

North Carolina Florida 

Policy Take-Up Rate Policy Take-Up Rate

Total Inside SFHA Total Inside SFHA

2011 - - - - 

2012 3.3 0.8 3.0 2.9

2013 5.2 1.3 3.9 2.5

2014 4.2 0.9 4.4 3.7

2015 5.1 1.4 3.1 2.7

2016 6.3 1.5 3.3 1.9

2017 11.8 2.2 6.5 2.6

2018 12.9 5.0 6.0 2.7

2019 8.9 2.7 2.4 1.3

SFHA = Special Flood Hazard Area.

Exhibit C.4 | Number of Federal Housing Administration Properties that Took Up Flood Insurance 

Policy in Year without Having Had It the Previous Year for North Carolina and Florida, 2011–2019

Year

North Carolina Florida 

Policy Take-Up Policy Take-Up

Total Inside SFHA Total Inside SFHA

2011 - - - - 

2012 41 4 842 305

2013 92 9 1,645 409

2014 79 7 2,163 755

2015 118 14 1,811 720

2016 161 17 1,956 591

2017 359 28 4,241 949

2018 467 72 4,198 1,094

2019 353 41 1,636 525

SFHA = Special Flood Hazard Area.
Flood Insurance Coverage of Federal Housing Administration Single-Family Homes | 51

Exhibit C.5 | Policy Drop Rate by Year for North Carolina and Florida for all Federal Housing 

Administration-Insured Single-Family Properties and for Properties within a Special Flood Hazard 

Area, 2011–2019

Year

North Carolina Florida 

Policy drop rate Policy drop rate

Total Inside SFHA Total Inside SFHA

2011 - - - - 

2012 11.77 3.83 12.20 5.45

2013 10.47 3.46 9.29 4.52

2014 12.02 3.60 8.26 3.32

2015 11.23 3.68 12.86 3.64

2016 11.96 3.41 17.10 3.40

2017 8.71 2.41 9.38 2.91

2018 7.51 2.35 8.75 2.96

2019 7.46 2.90 10.18 3.44

SFHA = Special Flood Hazard Area.

Exhibit C.6 | Number of FHA Properties that Dropped Flood Insurance Policy in Year After Having Had 

it the Previous Year for North Carolina and Florida, 2011–2019

Year

North Carolina Florida 

Policy drop Policy drop

Total Inside SFHA Total Inside SFHA

2011 - - - - 

2012 69 9 1,756 282

2013 129 17 2,651 480

2014 214 25 3,474 534

2015 211 28 6,394 737

2016 276 33 9,873 908

2017 223 27 5,522 928

2018 229 30 5,714 1,075

2019 270 42 7,084 1,370

SFHA = Special Flood Hazard Area.

Exhibit C.7 | Federal Housing Administration Properties that Have Had Flood Insurance Continuously, 

Overall and Inside a Special Flood Hazard Area, 2011–2019

Year North Carolina Florida 

Total Inside SFHA Total Inside SFHA

2011 375 207 8,493 4,297

2012 815 437 17,194 8,947

2013 1,177 615 25,537 13,712

2014 1,302 683 30,634 17,205

2015 1,636 875 38,010 22,978

2016 1,896 1,023 43,413 27,995

2017 2,163 1,164 48,397 32,053

2018 2,518 1,292 53,437 35,589

2019 2,936 1,403 58,956 38,585

SFHA = Special Flood Hazard Area.
Flood Insurance Coverage of Federal Housing Administration Single-Family Homes | 52

Exhibit C.8 | Summary Statistics of Monthly Mortgage Payment, Adjusted Monthly Effective Income, 

Adjusted Mortgage to Income Ratio of Federal Housing Administration-Insured Properties and Policy 

Premiums (with Adjusted Income Amounts)

 No. of 

Observations Mean 25th Percentile 50th Percentile 75th Percentile

North Carolina

Monthly mortgage 

payment 220,657 1,054 759 1,006 1,322

Inside SFHA 3,693 1,113 780 1,063 1,418

Outside SFHA 207,314 1,054 760 1,006 1,321

Adjusted monthly 

effective income 220,657 4,381 2,541 4,001 6,028

Inside SFHA 3,693 4,545 2,656 4,167 6,138

Outside SFHA 207,314 4,379 2,541 4,000 6,030

Adjusted ratio of 

mortgage payment 

to income

187,507 0.24 0.18 0.23 0.30

Inside SFHA 3,197 0.25 0.18 0.24 0.31

Outside SFHA 176,113 0.24 0.18 0.23 0.30

Policy premium 

amount 4,803 503.97 310.50 356.67 515.00

Inside SFHA 1,914 664.83 337.50 473.83 815.00

Outside SFHA 2,371 380.18 295.00 345.00 375.00

Florida 

Monthly mortgage 

payment 581,979 1,345 955 1,275 1,676

Inside SFHA 77,209 1,568 1,143 1,516 1,940

Outside SFHA 452,528 1,298 925 1,231 1,612

Adjusted monthly 

effective income 581,979 4,873 3,040 4,428 6,336

Inside SFHA 77,209 5,290 3,397 4,854 6,763

Outside SFHA 452,528 4,772 2,975 4,333 6,235

Adjusted ratio of 

mortgage payment 

to income

527,846 0.28 0.21 0.28 0.35

Inside SFHA 70,826 0.30 0.24 0.30 0.37

Outside SFHA 409,939 0.28 0.21 0.27 0.34

Policy premium 

amount 116,205 447 299.5 348 428

Inside SFHA 52,796 545.22 298.00 380.00 627.00

Outside SFHA 51,409 353.20 299.00 345.33 374.00

SFHA = Special Flood Hazard Area.

Note: The statistics presented above are calculated after adjusting low income amounts in the data. For North Carolina, income 

amounts between the 14th and 15th percentiles are set to zero. For Florida income amounts between the 8th and 9th

percentile are set to zero. 
Flood Insurance Coverage of Federal Housing Administration Single-Family Homes | 53

Exhibit C.9 | North Carolina: Flood Insurance Claims and Loan Performance (with Adjusted Income)

 

North Carolina

Dependent Variable: Loan Performance (= 1 if FHA property defaults in t+1, 0 otherwise) 

1 2 3 4 5 6 7 8 

At least one 

claim in t

1.896*** 1.848** 1.694* 1.675* 

At least one 

claim in t-1 1.722 1.726 2.135** 2.092**

SFHA status 1.081 1.029 1.030 0.994 0.870 0.871 

Monthly 

mortgage 

payment (logs)

 1.783*** 1.832***

Adjusted 

monthly 

effective 

income (logs)

 0.472*** 0.428*** 

Adjusted 

monthly 

mortgage 

payment to 

income ratio

 20.610*** 25.680*** 

Year fixed 

effects Yes Yes Yes Yes Yes Yes Yes Yes

Constant 0.0223*** 0.0218*** 0.00743**

* 0.161 0.0273*** 0.0273*** 0.0111*** 0.477 

No. of 

observations 15,451 15,451 13,343 13,335 10,839 10,839 9,332 9,326 

FHA = Federal Housing Administration. SFHA = Special Flood Hazard Area.

Note: The estimates presented above are calculated after adjusting low income amounts in the data. For North Carolina, 

income amounts between the 14th and 15th percentiles are set to zero. For Florida income amounts between the 8th and 9th

percentile are set to zero. 

Exhibit C.10 | Florida: Flood Insurance Claims and Loan Performance (with Adjusted Income)

 

Florida

Dependent Variable: Loan Performance (= 1 if FHA property defaults in t+1, 0 otherwise) 

1 2 3 4 5 6 7 8 

At least one claim 

in t

1.416*** 1.388*** 1.403*** 1.420*** 

At least one claim 

in t-1 1.016 0.999 0.985 1.004 

SFHA status 1.149*** 1.100*** 1.096*** 1.127*** 1.088*** 1.089*** 

Monthly mortgage 

payment (logs) 2.521*** 2.302*** 

Adjusted monthly 

effective income 

(logs)

 0.527*** 0.574*** 

Adjusted monthly 

mortgage payment 

to income ratio

 9.460*** 7.305*** 

Year fixed effects Yes Yes Yes Yes Yes Yes Yes Yes

Constant 0.0310*** 0.0299*** 0.0153*** 0.0085*** 0.0312*** 0.0302*** 0.0167*** 0.0081*** 

No. of observations 350,253 350,253 319,667 319,535 252,398 252,398 230,333 230,229 

FHA = Federal Housing Administration. SFHA = Special Flood Hazard Area.

Note: The estimates presented above are calculated after adjusting low income amounts in the data. For North Carolina, 

income amounts between the 14th and 15th percentiles are set to zero. For Florida income amounts between the 8th and 9th

percentile are set to zero.
Flood Insurance Coverage of Federal Housing Administration Single-Family Homes | 54

Exhibit C.11 | North Carolina: Premium Amounts, Flood Insurance Claims and Loan Performance (with 

Adjusted Income)

 

North Carolina

Dependent Variable: Loan Performance (= 1 if FHA property defaults in t+1, 0 otherwise) 

1 2 3 4 5 6 

Premium amount 

(logs) 1.264*** 1.251*** 1.232** 1.242** 1.222** 1.222**

At least one claim in t 1.746** 1.793** 1.538 1.585 

SFHA status 1.035 1.023 1.009 0.991 0.982 

Monthly mortgage 

payment (logs) 0.91 1.781***

Adjusted monthly 

effective income 

(logs)

0.641*** 0.476***

Year fixed effects Yes Yes Yes Yes Yes Yes

Constant 0.00561*** 0.00591*** 0.00633*** 0.0111*** 0.216 0.0456** 

No. of observations 15,450 15,450 15,450 15,046 13,342 13,334 

FHA = Federal Housing Administration. SFHA = Special Flood Hazard Area.

Note: The estimates presented above are calculated after adjusting low income amounts in the data. For North Carolina, 

income amounts between the 14th and 15th percentiles are set to zero. For Florida income amounts between the 8th and 9th

percentile are set to zero.

Exhibit C.12 | Florida: Premium Amounts, Flood Insurance Claims, and Loan Performance (with 

Adjusted Income)

 

Florida

Dependent Variable: Loan Performance (= 1 if FHA property defaults in t+1, 0 otherwise) 

1 2 3 4 5 6 

Premium amount 

(logs) 1.025 0.988 0.985 0.975 0.988 1.007 

At least one claim in t 1.395*** 1.436*** 1.386*** 1.417*** 

SFHA status 1.152*** 1.152*** 1.149*** 1.133*** 1.095*** 

Monthly mortgage 

payment (logs) 1.448*** 2.522*** 

Adjusted monthly 

effective income 

(logs)

0.905*** 0.527*** 

Year fixed effects Yes Yes Yes Yes Yes Yes

Constant 0.0268*** 0.0321*** 0.0326*** 0.00236*** 0.0742*** 0.00817*** 

No. of observations 350,251 350,251 350,251 346,370 319,665 319,533 

FHA = Federal Housing Administration. SFHA = Special Flood Hazard Area.

Note: The estimates presented above are calculated after adjusting low income amounts in the data. For North Carolina, 

income amounts between the 14th and 15th percentiles are set to zero. For Florida income amounts between the 8th and 9th

percentile are set to zero.
Flood Insurance Coverage of Federal Housing Administration Single-Family Homes | 55

Exhibit C.13 | North Carolina: Percentage Change in Premium Amounts and Loan Performance

 

North Carolina

Dependent Variable: Loan Performance (= 1 if FHA property defaults in t+1, 0 otherwise) 

1 2 3 4 5 6 

% change in premium 

amount 

1.003 1.003 1.002 1.002 1.002 1.002 

At least one claim in t 1.976*** 2.054*** 1.756** 1.752** 

SFHA status 1.166* 1.145 1.122 1.104 1.105 

Monthly mortgage 

payment (logs) 0.903 0.98 

Monthly effective 

income (logs) 0.879*** 0.880*** 

Year fixed effects Yes Yes Yes Yes Yes Yes

Constant 0.0198*** 0.0188*** 0.0182*** 0.0345*** 0.0401*** 0.0457*** 

No. of observations 13,829 13,829 13,829 13,453 12,038 12,030 

FHA = Federal Housing Administration. SFHA = Special Flood Hazard Area.

Exhibit C.14 | Florida: Percentage Change in Premium Amounts and Loan Performance

 

Florida

Dependent Variable: Loan Performance (= 1 if FHA property defaults in t+1, 0 

otherwise) 

1 2 3 4 5 6 

% change in premium amount 1.001*** 1.001*** 1.001*** 1.001*** 1.001*** 1.001*** 

At least one claim in t 1.393*** 1.429*** 1.375*** 1.393*** 

SFHA status 1.193*** 1.192*** 1.185*** 1.179*** 1.168*** 

Monthly mortgage payment 

(logs) 1.471*** 1.569*** 

Monthly effective income (logs) 0.994 0.908*** 

Year fixed effects Yes Yes Yes Yes Yes Yes

Constant 0.0309*** 0.0293*** 0.0293*** 0.00177*** 0.0303*** 0.00250*** 

No. of observations 307,785 307,785 307,785 304,285 281,793 281,667 

FHA = Federal Housing Administration. SFHA = Special Flood Hazard Area.
Flood Insurance Coverage of Federal Housing Administration Single-Family Homes | 56

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9257/nfip_eval_mandatory_purchase_requirement.pdf. 
November 2020

U.S. Department of Housing and Urban Development

Office of Policy Development and Research

Washington, DC 20410-6000