After Map Approval: Letters From Lenders

At Marshfield Special Town Meeting on October 24, 2016, the Town of Marshfield voted to accept the Flood Insurance Rate Maps (FIRMs).  On November 4th, the proposed FIRMs became effective.  The new effective maps have several implications for those newly mapped and already mapped into the flood zone.  However, the most immediate impacts are for those being moved in for the first time, known as newly mapped properties.


Many residents who are newly mapped into the flood zone are now receiving letters from their lenders notifying them their structure has been recently added to the flood zone for the first time.  While not all lenders are the same, most lenders are asking for flood insurance coverage for the LEAST of the following: Maximum insurance coverage available within the National Flood Insurance Program (NFIP) which is $250,000, the value of the loan, or the replacement cost of your building.  Those that receive these letters have 45 days to purchase NFIP flood insurance, or your lender will force place insurance on you.  It is highly recommended that you purchase a NFIP policy before you are forced placed.  In many cases, the forced placed insurance is a private policy and can be many times more expensive than a NFIP policy. Because there are no federal regulations yet on private forced placed flood insurance and how it should interact with the NFIP insurance, you may not be able to purchase a NFIP policy then cancel the forced placed policy.  This could create a hardship for the policy term.  It’s important to understand that forced placed insurance is obtained by the lender in the interest of the lender and not the homeowner. While forced placed flood insurance can be expensive, the NFIP newly mapped policies are inexpensive, starting at under $200.  This policy is not available to those that become forced placed and cannot cancel their forced placed flood insurance policy.   It is recommended that coverage is always taken for replacement cost of your building.  While not always required, covering yourself to replacement cost will benefit you the most in a loss.


With the recent map change, there are some areas where buildings have been removed from the flood zone and their lender no longer requires flood insurance.  For those that have been removed from the flood zone, the letter from their lender is a bit different.  The letter says that flood insurance is no longer required for your structure.  Again, for these structures, we recommend not canceling your policy.  Structures no longer in high hazard zones can also maintain coverage starting at $200.


Some residents have recently contacted us with the concern that while the FIRM shows the line going around or near their home, they are still being considered within the flood zone by their lender.  In this situation, the building owner would want to obtain an elevation certificate.  Once they have, if on that elevation certificate the lowest grade is higher than the Base Flood Elevation (BFE) on the flood map, then the building owner should apply for a Letter of Map Amendment (LOMA).  A LOMA does not change the map, rather it tells your lender that you have been incorrectly determined to be in the flood zone.  LOMAs can be applied for by homeowners, but it is recommended for a professional land surveyor to file the paperwork which speeds up the LOMA process.


With the FIRMS having been passed and made effective, our focus has now shifted.  We will be closely following the Letter of Map Revision (LOMR) that the Town of Marshfield and their consultants are currently working on.  While it is too early to know any results, we are hopeful in a further revision of the current effective FIRMs.  We will also be busy with the reform of the NFIP in 2017, and making sure policy holders understand their flood policy, coverages, and flood risk going forward.