When you are working on a loan application, you want to have easy access to as much of the required paperwork and reports as possible. As you may already know, not having even one vital piece of data can throw sand in the gears of the loan application process, leaving you and the potential homeowners frustrated by delays.
A prime example of this scenario pertains to flood insurance on properties. As FEMA notes, under federal law, the purchase of flood insurance is mandatory for all federal or federally related financial assistance for the acquisition of a building in high-risk flood areas. As per the Flood Disaster Protection Act of 1973, and as amended by the the National Flood Insurance Reform Act of 1994, the amount of flood insurance coverage that is required is the maximum amount of National Flood Insurance Program (NFIP) coverage that is available, the outstanding principal balance of the loan or the insurable value of the structure.
Mortgage lenders concerned about getting this important information in a timely manner can specifically request three determination reports about a property: basic, life-of-loan and/or flex certification.
Basic Flood Determination: When Is a Property at Risk?
If a home has some puddles in the backyard during a spring rainstorm, that is not exactly the same thing as having the entire basement fill with water. With this in mind, the Standard Flood Hazard Determination Form (SFHDF) is used by lenders to determine the flood risk for all building loans. The SFHDF is authorized by the National Flood Insurance Reform Act of 1994 (NFIRA) and is imposed on lenders by their regulatory entities, not by FEMA. Like many government forms, the SFHDF takes awhile to fill out and includes the name of the community in which the building or mobile home is located, the country name, NFIP community number — a six-digit number that you can find in the NFIP Community Status Book — and other information. If the mere thought of finding and compiling this info gives you a headache, take heed. Our platform can create this report for mortgage originators, freeing up your time to take care of other tasks related to the loan.
Life-of-Loan Determination: You Definitely Do Not Want to “LOL” at This Info
Unlike a basic flood determination, a Life-of-Loan, or LOL, determination will include an initial assessment and then ongoing determinations of whether a home lies in a flood hazard during the life of the loan. Since many home loans last 30 years, depending on where a property is located, there may be a reduced or heightened risk of flooding over time. For example, FEMA will publish a new or revised Flood Insurance Rate Map (FIRM) panel for a community from time to time — when this happens, it is important to go back through the history of homeowners who have the LOL servicing and recheck to see if those properties are still covered. Because a property may have been in a flood zone some time ago, making it no longer a flood risk, it is important for loan originators to have ready access to this information. DataTree helps to keep originators in the know about a property’s flood risk as it pertains to an LOL determination.
FlexCert Determination: It’s All About the Zones
FlexCert Determination will give you information about a property that is located in a Special Flood Hazard Area (SFHA). As FEMA notes, the SFHA is the land area that is covered by the floodwaters of the base flood, and it is where the NFIP’s floodplain management regulations must be enforced and where flood insurance must be purchased. The SFHA includes a number of zones including a number starting with the letter A and a variety that begin with V. FEMA has placed more than 20,000 communities into a category of flood zones, notes Flash.org — in general, the most hazardous flood zones that with V and include first-row, beach-front properties, and A zones, which are often also near the water. The letter “V” comes from “wave velocity” that can take place in these beach-front areas. At DataTree, we will track the property, offer flood data, consider flood map revisions and look into the FlexCert Determination and all of the codes to help our clients get the information that they need.
We Are Here to Help
If you would like to learn more about our innovative platform, we invite you to request a free flood determination report sample, as well as more information about the platform. Mortgage originators are also more than welcome to learn about our Mortgage Lending solutions by visiting our website and checking out our Home Equity Suite of Services. We offer expedited access to flood reports and help hard-working loan originators like you get through the paperwork process as quickly and efficiently as possible.