By Cody Roberts
Flood insurance is a topic that makes real estate lenders cringe. It is not quite as bad as TRID, but because FEMA is not a primary regulator of institutions and because flood is one of the topics most cited for violations by regulators, lenders are leery.
Most institutions outsource flood hazard determinations, and thus do not have to worry about the format of the form used for it. This, coupled with the fact that no announcement accompanied the posting of the revised form, is probably why many people missed the recent update to this form.
New Standard Flood Hazard Determination Form
The new Standard Flood Hazard Determination Form (SFHDF), FEMA Form 086-0-32, was published on June 1, 2016. In addition, FEMA has updated their website located at https://www.fema.gov/media-library/assets/documents/225 with the following message:
The Standard Flood Hazard Determination Form (SFHDF) is required for all federally backed loans and is used by lenders to determine the flood risk for their building loans…FEMA oversees the National Flood Insurance Program (NFIP) which makes federally administered flood insurance available throughout the United States and is responsible for development, updates and making the form available to users.
The previous form which expired on May 30, 2015 can continue to be used during the phase-in period of the new form. This page will be updated with additional information on transitioning to the new form soon.
Oddly, I could not find any other information on this update—including any publication in the Federal Register or on typical websites of regulators or industry. For instance, we all need to know:
– The previous form which expired on May 30, 2015 can continue to be used during the phase in period of the new form—what is the length of this “phase-in period”?
– This page will be updated with additional information on transitioning to the new form soon—what is meant by “soon”? When will this information be available?
Changes to Standard Flood Hazard Determination Form
Thankfully, the form had relatively minor changes. The most significant changes are as follows:
– Expiration date changed from May 30, 2015 to October 31, 2018.
– Where “lender” was noted, it is now “lender/servicer”.
– Form Sec. II, B. NATIONAL FLOOD INSURANCE PROGRAM (NFIP) DATA AFFECTING BUILDING/MOBILE HOME, 3. Letter of Map Change (LOMC) – now must answer yes or no and if yes, and LOMC date/number is available, enter date and case number.
– INSTRUCTIONS, SECTION 1, 3. LENDER/SERVICER ID NO – there are no longer detailed different instructions for FDIC-insured, federally-insured credit unions, Farm Credit institutions, and other lenders who fund loans sold to or securitized by FNMA or FHLMC.
– INSTRUCTIONS, SECTION 2, B. NFIP DATA AFFECTING BUILDING/MOBILE HOME, 3. Is there a Letter of Map Change (LOMC)? – LOMC largely replaced Letter of Map Amendment (LOMA) and Letter of Map Revision (LOMR) verbiage.
– INSTRUCTIONS, SECTION 2, MULTIPLE BUILDINGS – rather than detailed instructions on how to handle multiple buildings, you are to contact your regulator, servicer, lender or other entity as applicable.
We will let you know when more information is made available on this topic.