Show All Answers

1. What is a “flood zone determination” as it relates to a mortgage?

Flood Zone Determination is a process used by lending institutions to meet their federal banking regulation requirements to make an evaluation of whether or not the structure they are processing for a loan is in the one percent chance flood hazard area. Lenders can do this evaluation themselves or, as most elect to do, hire such service provided by firms that make flood zone determinations their sole business.

2. What is the Flood Zone for Oconto County?

The 100- and 500-year Flood Zones may be viewed at the Oconto County Land and Water Resources Department. Unofficial maps may be viewed on the Federal Emergency Management Agency (FEMA) website.

3. How do lenders find flood zone determination companies?

The Federal Emergency Management's (FEMA) website provides a list of companies that are in the business of providing flood determination services. FEMA makes the following note regarding the list: "FEMA does not attest to the quality or accuracy of the services offered. That must be determined by potential users of those services. FEMA does not approve, endorse, regulate, or otherwise sanction any company on this list." 

4. If a property owner disagrees with the lender’s determination that the property is in a floodplain, what can be done?

In some cases, a lender determines that a property is in the Special Flood Hazard Area (SFHA), but the property owner disagrees. The SFHA is also known as the 100-year floodplain. It is more precisely defined as the floodplain associated with a flood that has a 1% annual chance of being equaled or exceeded in any given year. Therefore, the SFHA is not a flood event that happens once in a hundred years; rather, a flood event that has a 1% chance of occurring every year. Property owners in this situation have a couple of options. They may apply for a Letter of Map Amendment (LOMA), or a Letter of Map Revision based on Fill (LOMR-F) (if fill placement is the basis of the request). In addition, property owners may apply for a Letter of Determination Review (LODR). Forms for these purposes can be found on the FEMA website. The following paragraphs describe first the LOMA or LOMR-F process, followed by the LODR process.

Upon receiving a completed MT-EZ (for LOMAs) or MT-1 (for LOMR-Fs) application, FEMA reviews property-specific information (including surveyed elevation data; typically the elevation of the lowest adjacent grade of the structure in question, provided by a licensed land surveyor. Note: The homeowner may be required to hire a licensed engineer or surveyor to perform this elevation survey, if this data is not readily available), and makes a final flood determination for the property. Once an application and all necessary data are received, the determination is normally issued within 30 to 60 days. If the LOMA or LOMR-F removes the SFHA designation from the property, it can then be presented to the lender as proof that there is no federal flood insurance requirement for the property. However, even though a LOMA or LOMR-F may waive the federal requirement for flood insurance, a lender retains the prerogative to require flood insurance. No fee is charged for the review of a LOMA; however; there is a $425 review fee for a LOMR-F. A listing of all fees associated with flood map reviews can be found on the FEMA website.

In addition, property owners may apply for a Letter of Determination Review (LODR). A LODR is a review of the lender's determination. In other words, the LODR is a process where FEMA reviews the same information the lender used to determine that the structure was located in a SFHA. It is important to note that the LODR process does not consider the elevation of the structure or property above the flood level; rather, it considers only the location of the structure relative to the special flood hazard area boundary shown on the FIRM. Thus, property owners should be aware that the lender does not consider the elevation of the property or structure when determining if the property or structure is in or out of the SFHA. FEMA reviews this information and issues its finding of whether the structure is located in the SFHA according to the current NFIP map. The request for such a letter must be jointly requested by the property owner and the lender no later than 45 days following the date the lender notified the borrower that the property is in a special flood hazard area. While this determination cannot consider the elevation of the structure or property, it can be useful if the property owner feels the lender's interpretation of the map is incorrect.

To summarize, then, there are obviously some important distinctions between the two processes (LODR versus LOMA/LOMR-F):

• The determinations are based on different data. The LODR process does not consider the (vertical) elevation of the structure or property above the flood level; rather, it considers only the horizontal location of the structure relative to the special flood hazard area boundary shown on the Flood Insurance Rate Map. The LOMA/LOMR-F process uses actual survey elevation data to determine if the property or structure is at or above the elevation of the SFHA.
• There are different fees involved:
  • LOMA: No fee
  • LODR: $80
  • LOMR-F: $425
• The determinations result in different actions. A LODR does not result in an amendment or revision to the National Flood Insurance Program map. It is only FEMA's finding regarding the structure's location with respect to a delineated special flood hazard area. A LOMA or LOMR-F actually removes the SFHA designation from the property by letter.

5. Are local officials liable for making flood zone determinations?

The new Fannie Mae/Freddie Mac flood insurance guidelines require lenders to determine whether a structure is in a Special Flood Hazard Area (SFHA). The key distinction for government officials is between providing information and making a determination that a property is in or out of a SFHA. If a local official makes a determination and fills out the Standard Flood Hazard Determination Form (SFHDF), he/she could be liable for inaccuracies or misrepresentations. Local officials' only obligation is to have the information available and accessible to the public, including the determination companies.

In Wisconsin, it is recommended that local officials require the property owner to provide a site plan showing the location of the proposed project in relation to the SFHA. The site plan should be done by a licensed engineer or surveyor.

Local officials should be extremely cautious about making flood zone determinations. The flood zone determination companies are being paid to use their expertise to make this determination and to guarantee that it is accurate. These companies cannot expect local officials to make the determination. This is not the local officials' responsibility; it is the lender's, under federal law.

If a local official chooses to assist property owners in determining their flood zone status, it should be made clear that the determination is for informational purposes only. The property owner's lender must still have an official determination done on an approved form, with the preparer's name, address, and telephone number listed. The preparer is the individual or company that made the determination, not the government agency or official that provided information. Local planning and zoning officials' names should not appear in this space. Local officials should make sure the lenders in their area understand this.

The making of flood zone determinations is a growing business, and competition is keen. There are over 100 companies providing the service. To cut costs, some companies simply call local officials and ask them to interpret a flood map over the phone. It's best to not provide the interpretation. The local official has no way of knowing if the property information they are given is accurate. It is the determination company's responsibility to visually interpret the correct map in making a determination. Any reputable company will have all the current maps for any area in which they do business. Local governments simply need to make the flood maps available for public review. Communities currently participating in the Community Rating System (CRS) program may wish to take note of the requirements of Activity 320 - Map Information. This CRS activity is designed to reward communities for informing a requester of a property's flood zone status, not determine whether flood insurance is required. This activity does not create any liability for government officials. Local officials should make it clear to all requesters that the lender (or a third party hired by the lender) is still required to do an accurate determination and fill out the determination form.

6. How do flood certification companies determine if the property lies within a flood zone?

Harold and Blanche are buying a new home. As the closing approaches, they are contacted by the mortgage company and told that they need flood insurance. They notify their agent, Robbie Realtor, who calls the mortgage company and informs the lender that the survey shows the house is not in a flood zone. The mortgage company requests that a certification be obtained from a flood certification company. This is done, and the report verifies Robbie's claim that the property is outside the flood zone. The lender agrees that flood insurance is not required. How do flood certification companies determine if the property lies within a flood zone?

Flood certification companies utilize federal and county flood zone maps to determine whether or not property lies within a flood zone. Once the determination is made from a federal map that the property appears to be located within a flood zone, these results are compared with the county maps. If access to the survey of the property is available, this is used as an additional tool in the decision-making process. Finally, visual inspection of the property helps in determining if the developer has modified the topography of the land to raise the lot and/or home above the flood zone.

Flood zone lines can appear to come close to a house, and it is difficult to determine the exact location of a flood line merely from a map. For many new subdivisions, roads and streets have not yet been drawn on the map, and the location of the lot can be difficult to discern. Once a flood certification company finds a lot to be located in a flood zone, the survey should be checked to confirm the findings. If the survey shows that the house lies outside the flood zone, the lender should be asked for a re-evaluation by the same or a different company. This may result in saving a client money and peace of mind.