Answers about Flood Insurance

When can lenders or servicers charge the borrower a fee for making a flood determination?

There are four instances under the National Flood Insurance Act (Act) when the borrower can be charged a fee for a flood determination:

1. When the determination is made in connection with the making, increasing, extending, or renewing of a loan that is initiated by the borrower;
2. When the determination is prompted by a revision or updating of floodplain areas or flood-risk zones by Federal Emergency Management Agency (FEMA);
3. When the determination is prompted by FEMA’s publication of notices that affect the area in which the secured property is located; or
4. When the determination results in force placement of insurance.

The loan agreement or other contractual documents between the parties may also permit the imposition of fees.

September 2017