Anyone who has tried to apply this definition, however, knows it is not quite so simple. Informal discussions with FEMA revealed that a structure must have at least two stiff walls to be considered a walled building. SFHAs are areas within a floodplain that have a 1 percent or greater chance of flood occurrence within a given year. FEMA defines SFHAs and issues maps showing the location of such areas. Most owners of improved real property located within a participating community's SFHA are eligible to purchase NFIP flood insurance.
Different rules apply to people and businesses in nonparticipating communities.
For them, NFIP insurance is not available at all. At one time, lenders were not permitted to extend conventional loans secured by improved real property in a nonparticipating community's SFHAs. When extending loans in SFHAs in nonparticipating communities, lenders must give special consideration to the additional collateral risk presented by these loans. This potential flood loss risk occasionally results in the lender requiring the borrower to acquire flood insurance through a private provider. Although this article does not address all the nuances of NFIP, it does describe some of the more basic aspects of the program.