A flood certification is required on all mortgage applications. The certification is provided by a third-party vendor for the lender to verify whether the domicile and any structures that are used as a security for a mortgage loan are in an area which requires flood insurance as determined by the US Army Corps of Engineers.
Flood zone classifications are designated by a letter. These are:
- A – 100 Year Flood Plain
- B – 500 Year Flood Plain
- C – Mapped areas with no known flood hazards
- V – Areas subject to coastal or tidal flooding
- X – Areas that are not mapped by the Corps of Engineers
Properties which are located in flood zones are “A” and “V” are required to have flood insurance. The others areas are required to be disclosed to the borrowers, but flood insurance is not required. If properties are located in “A” or “V”, the notice regarding required flood insurance must be provided a minimum of 10 days prior to the date of closing.
Occasionally, a flood certificate will come back with a two letter or letter and number designation such as “AE” or “A-100”. The letter that determines whether flood insurance is required is always the first letter. The other items designate sub-features to the type of flooding that may occur such as flooding from flash flood, ponding, or back-flooding from a tributary to a larger stream. Insurance providers will review these sub-designations when determining the premium for flood insurance, but it is not a concern for a mortgage lender. A lender will always require that the flood coverage from the insurance provider matches the flood certification. If property is located in flood zone “A”, then all policies must indicate that the zone also begins with “A”.
If the subject property is inside a condominium project, there will still be a flood certificate. In these cases, if the project is located in a mandatory flood insurance area, the condo project will be required to have flood coverage. This policy is called a Residential Condominium Building Association Policy (“RCBAP”). The Condo Homeowners Association will normally have this already in place.
Flood related issues are a complex area of mortgage lending. For more information on flood zones and required insurance coverages, please contact your Googain Loan Officer.