It’s Spring: Do You Know Where Your Flood Zones Are?

Temperatures are rising. Rain is falling. Rivers are flooding, and hurricane season officially started June 1. Is your mortgage portfolio protected?

For decades, lenders have been required to determine whether a property is in a flood zone before approving a mortgage, and then ensure properties in flood zones are covered by insurance. That’s a bit trickier than making sure a consumer auto loan is covered with a collision or liability policy.

Flood zones can change, and a mortgaged property that did not need flood insurance at the loan origination date might need it five years later. It’s up to lenders to keep track of map revisions and any other Federal Emergency Management Agency (FEMA) changes regarding exclusions or exceptions.

After several years of record flooding, catastrophic hurricanes, and historic super storms, the Biggert-Waters Flood Insurance Report Act has raised its penalty from $350 per flood violation to a minimum of $2,000, and lifted its annual $10,000 cap.

So a credit union that fails to monitor flood zone revisions and require members to have flood insurance could end up owing the government a lot of money.

Some credit unions monitor flood zones and related certifications on their own, while others partner with a vendor. With FEMA issuing thousands of flood map updates every year, passing the risk and responsibility to a vendor can be prudent for credit unions lacking the staff or expertise to ensure flood zone certifications are accurate and mortgaged properties in flood zones are insured.