About the Mandatory
Purchase of Flood Insurance Requirement
NFIP: Long BeachTownship
participates in the National Flood Insurance Program (NFIP), which makes
federally backed flood insurance available for all eligible
buildings in the floodplain. Flood insurance covers direct
losses caused by surface
flooding, ocean or bay flooding, and local drainage
problems.
The NFIP insures buildings, including mobile homes, with two
types of coverage:
building and contents. Building coverage is for the walls,
floors, insulation, furnace, and other items permanently attached to the
structure. Contents coverage may be purchased
separately, if the contents are in an insurable building.
Mandatory Purchase
Requirement: The
Flood Disaster Protection Act of 1973 and the National Flood Insurance Reform
Act of 1994 made the purchase of flood insurance
mandatory for federally backed mortgages on buildings
located in the Special Flood
Hazard Areas (SFHAs). It also affects all forms of Federal
or Federally related financial
assistance for buildings in SFHAs. The SFHA is the base
(100-year) floodplain mapped
on a Flood Insurance Rate Map (FIRM). It is shown as one or
more zones that begin
with the letter “A” or “V”.
The rule applies to secured mortgage loans from such
financial institutions as commercial
lenders, savings and loan associations, savings banks, and
credit unions that are regulated, supervised, or insured by Federal agencies
such as the Federal Deposit Insurance Corporation and the Office of Thrift
Supervision. It also applies to all mortgage
loans purchased by Fannie Mae or Freddie Mac in the
secondary mortgage market.
Federal financial assistance programs affected by the laws
include loans and grants from
Agencies such as the Department of Veterans Affairs, Farmers
Home Administration, Federal Housing Administration, Small Business
Administration, and the Department of Homeland Security’s Federal Emergency
Management Agency (FEMA).
How it Works.: Lenders are required to complete
a Standard Flood Hazard Determination (SFHD) form whenever they make, increase,
extend or renew a mortgage, home equity, home improvement, commercial, or farm
credit loan to determine if the building or mobile home is in a SFHA. It is the
Federal agency’s or the lender’s responsibility to check the current FIRM to
determine if the building is in an SFHA. Copies of the FIRM are available for
review at the Long BeachTownship building
Department and the Surf City Branch of the Ocean County Library. Lenders may
also have copies or they use a flood zone determination company to provide the
SFHD form.
If the building is in a SFHA, the Federal agency or lender
is required by law to require the recipient to purchase a flood insurance
policy on the building. Federal regulations require building coverage equal to
the amount of the loan (excluding appraised value of the land) or the maximum
amount of insurance available for the NFIP, whichever is less. The maximum
amount available for a single-family residence is $250,000. Government
sponsored enterprises, such as Freddie Mac and Fannie Mae,
have stricter requirements.
The mandatory purchase requirement does not affect loans or
financial assistance for items that are not covered by a flood insurance
policy, such as vehicles, business expenses, landscaping, and vacant lots. It
does not affect loans for buildings that are not in a SFHA, even though a
portion of the lot may be. While not mandated by law, a lender may require a
flood insurance policy, as a condition of a loan, for a property in any zone on
a FIRM.
If a person feels that a SFHD form incorrectly places the
property in the SFHA, he or she
may request a Letter of Determination Review from FEMA. This
must be submitted within 45 days of the determination. More information can be
found at the following link;
