Answers about Flood Insurance

When I bought my home, it was not in a Special Flood Hazard Area (SFHA), but when I refinanced my mortgage, the bank said I had to buy flood insurance because the flood maps had changed. Can the bank require me to buy flood insurance?

Yes. If the bank learns that a flood map revision identifies a structure securing a loan as having been placed in a Special Flood Hazard Area (SFHA) in which flood insurance is available under the Flood Disaster Protection Act (FDPA or Act), the bank must notify you that flood insurance is required.

When a building or mobile home securing a loan is located in an SFHA in which flood insurance is available under the FDPA, a national bank may not make, increase, extend, or renew any mortgage loan secured by that property unless the building or mobile home is covered by flood insurance.

Under the FDPA, the mandatory flood insurance purchase amount is the lesser of:

  • The outstanding principal balance of the loan(s), or
  • The maximum amount of insurance available under the National Flood Insurance Program (NFIP), which is the lesser of
    • The maximum limit available for the type of structure ($250,000 for a residential structure,), or
    • The insurable value of the structure (typically the replacement cost value of your home).

Coverage must be obtained and maintained during the term of the loan.

February 2011