Home Lenders FAQs - Lenders What are FHA's Flood Insurance Requirements ?
What are FHA's Flood Insurance Requirements ?

The lender is responsible for determining the eligibility of properties in flood hazard areas and relies upon the FHA appraiser's notation on the appraisal report.

1. Proposed and New Construction. If any portion of the property improvements (the dwelling and related structures/equipment essential to the value of the property and subject to flood damage) is located within a special flood hazard area (SFHA) designated by the Federal Emergency Management Agency (FEMA), the property is not eligible for FHA mortgage insurance unless:

(a) a final Letter of Map Amendment (LOMA) or final Letter of Map Revision (LOMR) that removed the property from the SFHA location is obtained from FEMA or

(b) if the property is not removed from the SFHA location by a LOMA or LOMR, the lender obtains a FEMA National Flood Insurance Program Elevation Certificate (form FEMA 81-31 "flood elevation certificate") documenting that the lowest floor (including the basement) of the residential building and related improvements to the property is built at or above the 100 year flood elevation. National flood insurance is not required if a LOMA or LOMR is obtained but is required when a flood elevation certificate documents that the property remains located within the SFHA. The LOMA, LOMR, or flood elevation certificate must be submitted with the case for endorsement.

If the lender is uncertain about whether the property is located within a SFHA, it may require a flood elevation certificate. In addition, the lender has discretion to require national flood insurance even if the residential building and related improvements to the property are not located within the SFHA, but the lender has reason to believe that the building and related improvements to the property may be vulnerable to damage from flooding.

2. Existing Construction. Flood insurance must be obtained and maintained for an existing property if any portion of the residential buildings located on the property are in a special flood hazard area.

3. Condominium. The Homeowners' Association (HOA), not the individual owner, is responsible for maintaining flood insurance on condominium buildings located within a special flood hazard area. If the FHA appraiser reports that buildings in a condominium project are located within a SFHA, the lender is responsible for ensuring that the HOA obtains and maintains national flood insurance on the buildings located within the flood hazard area. The lender is not permitted to submit a LOMA, LOMR or elevation certification for any specific dwelling unit located within a newly constructed condominium project less than one year old.

4. Manufactured Homes. If any portion of the property improvements for both new and existing manufactured home properties are located within a SFHA, the property is not eligible for FHA mortgage insurance without:

1) a FEMA issued LOMA or LOMR, or

2) an elevation certification prepared by a licensed engineer or surveyor on the finished construction indication the ground beneath the manufactured home is at or above the 100 year flood plain. When utilizing an elevation certification, the property is still in the SFHA and the loan will require flood insurance.

 

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