We have received several recent questions regarding flood insurance.
Declaration Page – Are we still required to compare the risk rating on our flood determination to the risk rating on the flood insurance policy?
FEMA has revised the declaration page for flood insurance policies. Among the changes, the risk rating has been removed. It is no longer possible to compare the risk rating from the Standard Flood Hazard Determination Form to the declaration page of a FEMA flood insurance policy.
The existing procedures, from the Flood Insurance FAQs, requires that such a review take place. If a discrepancy is found then then the lender is responsible for resolving the discrepancy. The proposed FAQs would change the requirement to state if a discrepancy is found, it should simply be noted in the loan file. Both the existing FAQ and the proposed FAQ are obsolete as a result of FEMA’s change to the declaration form.
Standard Flood Hazard Determination Form (SFHDF). –When are we required to start using the revised SFHDF?
FEMA published the revised SFHDF in late September. Neither the revised form, not the instructions for the revised form contains a mandatory use date. No guidance has been received from FEMA or from the prudential regulatory agencies regarding mandatory use of the revised form.
The revised form contains a rather obvious typo. In Section C.2., the statement “Federal Flood Insurance is not available (community participates in the NFIP)” should read “Federal Flood Insurance is not available (community does not participate in the NFIP)” (emphasis added.) This error may add further delays to the use of the revised form.
We suggest using the form provided by your flood hazard determination company (the old form, the revised form with the typo, or the revised form with the typo corrected) until the prudential federal regulators provide guidance on the topic.
Frequently Asked Questions (FAQs) – When will the revised flood insurance FAQs be completed?
The federal bank regulatory agencies last updated the Interagency Questions and Answers Regarding Flood Insurance on October 17, 2011. That is evidence of regulatory incompetence.
On June 26, 2020, and again on March 11, 2021, the agencies published proposed new and revised FAQs. The comment period on the final group of FAQs expired on May 17, 2021. The industry has been waiting for the final FAQs ever since.
With FEMA’s removal of the risk rating from the declaration page (see above) it is suspected that the final FAQs will be further delayed. It is unlikely that the final FAQs will be released before the end of 2021.