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To Janice Mitchell by lonyoo


									                             FAQ Hand Out

Date:         February 18, 2009

Presenters:   Janice Mitchell, Federal Emergency Management Agency (FEMA),
              Region 4, Insurance Program Specialist
              James K. Meredith, NFIP State Coordinator, ADECA

Subject:      NFIP and Flood Insurance Requirements
Audience:     Realtors, Home owners, Lake Martin Recreational Association, Lake
              Martin Home Owners & Boat Owners Association, Alabama Power
              Company personnel, Office of Water Resources personnel


The U. S. Congress established the (National Flood Insurance Program
(NFIP) on August 1, 1968, with the passage of the National Flood Insurance
Act of 1968. This Act enables property owners or renters in participating
communities to purchase insurance protection against losses from flooding.

Participation in the NFIP is voluntary. It is based on an agreement between
local communities and the Federal Government that states if a community
will adopt and enforce a floodplain management ordinance to reduce future
flood risks to new construction in Special Flood Hazard Areas (SFHA), the
Federal Government will make flood insurance available within the
community. FEMA identifies the SFHA on the Flood Hazard Boundary
Map (FHBM) or the Flood Insurance Rate Map (FIRM) as determined by
the hydrologic and hydraulic studies developed for the flooding sources
within that community.

The NFIP was broadened and modified with the passage of the Flood
Disaster Protection Act of 1973 and other legislative measures. This act
established the Mandatory Purchase Guidelines. These guidelines mandate
that any federally regulated lender could not make, increase extend, or renew
any loan secured by improved real property located in an SFHA in a
participating community unless the secured building and any personal
property securing the loan were covered for the life of the loan by a flood
insurance policy.

The Act was further modified by the National Flood Insurance Reform Act
of 1994 and the Flood Insurance Reform Act of 2004. These established
requirements to escrow flood insurance premiums when escrowing for other
purposes, grants authority for lenders and servicers to force place coverage if
needed, enhanced flood hazard notice requirements, established fines for
lenders found not be in compliance with the guidelines, established a 30-day
waiting period for the policy to become effective unless connected to a loan
closing and grants authority to the lender to charge reasonable fees for
determination of flood zone.

   1. What triggers a review by a lender of their mortgage portfolio?
         Review due to flood map change
         Review due to lender review policy
         Review due to economic conditions
         Review due to refinancing request
         Review due to equity loan request
         Review due to sale of structure/property

   2. Who makes the determination concerning flood exposure to property?

      The lender is responsible for making a determination based on the location of the
      structure in relation to the special flood hazard area as shown on the Flood
      Insurance Rate Map (FIRM). The lender also has the right to hire a third party
      determination company to make these determinations. The lender or the
      determination company is then responsible for completing the Standard Flood
      Hazard Determination Form showing their determination.

   3. Who is the final authority on requirement for flood insurance?

      The lender is the final authority. If the structure is located within the special flood
      hazard area (SFHA) on the currently effective FIRM, they must require flood
      insurance if they have an insurable interest in that structure. If the lenders
      regulatory authorities perform a review of their files and find that they do not
      have flood insurance policies for structures located within the SFHA, that lender
      can face fines up to $100,000 a year.

   4. What is the only government agency with the authority to “waive” flood
      insurance requirements?

      There are only two reasons for waiving the flood insurance requirement:
                a.     FEMA has issued a new FIRM that is now effective and
                       changes the zone designation to X, removing the mandatory
                       purchase requirement; or
                b.     A LOMA or LOMR has been issued by FEMA changing the
                       zone designation to X, removing the mandatory purchase

5. What is the only government agency with the authority to change a flood

          FEMA

6. What is a “45 Day Letter”?

   If during the course of a loan, the lender determines that the structure is located
   within the SFHA and flood insurance is now required they are required to provide
   written notification to the borrower that flood insurance is now required and proof
   of having a flood policy must be provided to the lender within 45 days.

   If proof is not shown within the 45 day period, the lender can then force place a
   flood policy to protect their interest.

7. What should you do when you receive a “45 Day Letter”?

   Contact your insurance agent to obtain a flood policy and provide a copy of the
   declaration page to the lender to prevent the force placement of insurance at a
   much higher premium.

   If you feel that you should not be classified as being within the SFHA, you then
   have time to apply for a Letter of Map Amendment (LOMA) if the property is all
   natural grade or a Letter of Map Revision based on Fill, (LOMR-F) if fill dirt has
   been used to elevate the structure. If you are granted the LOMA or LOMR-F
   AND IF your lender agrees to accept the letter to waive the flood insurance
   requirement, you may then cancel the flood policy and obtain a full refund of the
   current policy year.

8. Why should the owner get his policy rather than letting the lender force
   place it?

   The force placed policy will be at a much higher premium and is often difficult to
9. How does the home owner/business owner request a waiver from FEMA?

   Requests for a waiver are made through the LOMA or LOMR-F process using the
   MT-1 application form for single lot or structure requests. Multi-lot or multi
   structure requests also use the MT-1 application package. Once the application
   package and all the required supporting technical data are received, FEMA will
   compare the lowest ground elevation touching the structure to the base flood
   elevation for that location. If the lowest adjacent ground (LAG) elevation is at or
   above the base flood elevation, FEMA is issue the LOMA or LOMR-F changing
   the zone designation.

10. How long does this process take?

   Single lot or structure request take approximately 4 weeks one all data is received.
   Multi-lot or multi-structure request take approximately 8 weeks to complete. This
   is provided that a new hydrology or hydraulic study was not required to develop
   base flood elevations. If a study is submitted, the review will take longer.

11. How long will the LOMA/LOMR-F cover the structure?

   The LOMA/LOMR-F will follow the structure and remain effective until such
   time as a new hydrologic or hydraulic study shows that the base flood elevation is
   now lower for that particular area.

12. What happens if FEMA does not issue a waiver?

   If you have a mortgage and do not provide proof of a flood policy, the lender will
   force place a policy.

13. Can you avoid buying flood insurance?

   Yes, pay off the mortgage

14. Will this requirement come up again if I pay off my mortgage?

   Yes. If you sell the home and the buyers are taking out a mortgage, a
   determination will have to be made. They would have to purchase a flood
   insurance policy before they could close on the loan. This may cause potential
   buyers to have second thoughts.

15. If FEMA waives the flood insurance requirement, can the lender still require
    flood insurance?

   Yes, the lender has the right to require flood insurance regardless of what flood
   zone the structure is located.

16. What is a Preferred Risk policy?

   The Preferred Risk Policy (PRP) is low-cost coverage available for eligible
   buildings located in the moderate-risk B, C, and X zones in NFIP Regular
   Program communities.

   The structure must be within the B, C, or X zone on the current effective FIRM.

17. What is the annual premium for an average Preferred Risk Policy?

   PRP average premium is around $300. Renters may also purchase contents
   coverage under the PRP starting as low as $39 for $8000 worth of coverage.

18. What is the Grandfather Clause pertaining to insurance coverage?

   To recognize policyholders who have built in compliance with the Flood
   Insurance Rate Map (FIRM) and/or remained loyal customers of the NFIP by
   maintaining continuous coverage, FEMA has established the “Grandfather Rule”.
   For such buildings, the insured would have the option of using the current rating
   criteria for the property or having the premium rate determined by using the BFE
   and/or flood zone on the FIRM (old map) in effect when the building was
   originally constructed, for those built in compliance, or when coverage was first
   obtained for those with continuous coverage.

   If there has been a new FIRM issued for the community, there are conditions that
   must be met to qualify under the “Grandfathering Rule”.

   1. For those properties with a policy in place, it will be renewed at the same rate
      so long as the referenced level floor has not been altered to be below the base
      flood elevation. Example – unfinished basement altered into living space.
   2. New Business – May be rated based on the FIRM zone and base flood
      elevation on the old map in effect on the date of construction, provided that:
          a. The building was build in compliance with the map in effect at the
             time of construction; and
          b. The building has not been altered in any way that has resulted in a
             lowering of the elevation of the rated floor; and
          c. The structure has not been substantially improved.

   The property owner must provide proper documentation to the insurance provider
   writing the policy. The documentation must show: the date of the FIRM; the zone
   on that FIRM in which the property is located; the base flood elevation, if any, for
   that zone; a copy of the map panel showing the location of the building and the
   rating element that is to be grandfathered. A letter from a community official
   verifying this information or an Elevation Certificate is acceptable.

19. Who is qualified in the State of Alabama to execute an elevation certificate
    and file a LOMA or LOMR-F?

   In the State of Alabama, the elevation certificate must be completed by a licensed,
   registered professional surveyor or a licensed professional engineer that has the
   authority to complete field surveys.

   The Letter of Map Amendment (LOMA) or Letter of Map Revision based on Fill
   (LOMR-F) may be submitted by the property owner, developer, city, county,
   surveyor, engineer, lender or flood-search company.

   The technical documentation (elevation certificate, boundary survey, site plans,
   etc.) attached to the LOMA or LOMR-F package must be certified by a licensed
   professional surveyor or engineer.

20. Would additional documentation be helpful in the LOMA filing process?

   The completed MT-1 application package is required. The additional required
   documentation is:
      a. Copy of the legal description shown recordation information
      b. Copy of a subdivision plat or tax assessors map showing recordation
      c. Certified boundary survey or site plan showing the locations of the
      d. Certified elevation certificate or the certified Elevation Information Form
         for multi-lots.
      e. Copy of the FIRM marked to indicate the approximate location of the
         property in question. A FIRMETTE is acceptable.
      f. If the property is in an approximate Zone A where the base flood elevation
         has not been established by FEMA, a base flood elevation developed by a
         professional engineer using FEMA approved methodologies will need to
          be developed and submitted. This could be a study developed using
          FEMA’s Quick-2 software which is available on our web site –
 It could be a study for the area that has not been
          submitted to FEMA and the community is using as “best available data”
          for compliance purposes.

21. What information, if any, could the Power Company provide to assist the
    home owner with application for a LOMA?

   If a study developing the base flood elevations was produced on the lake or water
   source, the Power Company could provide the base flood elevation relevant to the
   property in question. If a study was not developed, historical flooding
   information, top of spillway or other information might be of assistance in
   developing a base flood elevation for the site.

22. Why is the Power Company easement contour line not the same as FEMA’s
    1% chance of flood contour delineation?

   Many of the lakes developed by the Power Company were developed before the
   passage of the National Flood Insurance Act of 1968 or before there was any
   regulations to determine the base flood elevation. In most cases, some type of
   study was done by the Power Company, but it was normally based on flood
   events smaller than the 1% chance storm (i.e., 10% or 2% chance) which is what
   the FEMA designated SFHAs are based on. The 1% chance storm is a much
   larger event which means the easement line and the floodplain lines would not be
   the same.

23. Does the Power Company easement contour line have any impact on flood
    insurance requirements?

   The Power Company easement line gives the Power Company the right to use the
   land between the line and the water source for flood control purposes as needed.
   If the area is designated as a SFHA on the Flood Insurance Rate Map, the
   easement area is also considered to be a floodplain and/or floodway. This means
   it is still subject to all the rules and regulations adopted by the participating
   community. Permits are required for all development – building of docks, piers,
   structures, grading, paving, etc. Residential structures would have to be elevated
   to or above the base flood elevation as adopted by the community and would have
   to be equipped with the appropriate flood openings.
   24. Will FEMA insure houses built completely over water?

       Buildings entirely over water or principally below ground, gas and liquid storage
       tanks, animals, fish, aircraft, wharves, piers, bulkheads, growing crops, shrubbery,
       land, livestock, roads, machinery or equipment in the open, and most motor
       vehicles are not insurable.

   25. What about other structures built over water?

       If the structure is partially on land and partially over water it is insurable, but
       there may be some limitations on coverage.

   26. Do FEMA flood regulations (44 CFR) have any regulatory authority over
       recreational use of water resources within the State of Alabama?

       FEMA regulations found in 44 CFR Part 60.3 through Part 70 applies to the
       development of the land within the special flood hazard areas. It does not apply
       to the recreational use of the water resource. That authority would depend on
       the “ownership” of the water source.


Contact Information

Janice Mitchell
Insurance Program Specialist
FEMA, Region 4
Phone 770-220-5441
Cell 404-694-5279
Fax    770-220-3117

Ken Meredith
NFIP State Coordinator
State of Alabama
401 Adams Avenue
P.O. Drawer 5690
Montgomery, Alabama 36103-5690
Office: (334) 353-0853
Fax: (334) 242-0776
BlackBerry: (334) 590-4756

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