General Information on Flood Insurance
(Note: Important Changes Released 10/2001)
We are providing the following information to aid lenders and loan servicers when requesting flood insurance. Included here is useful information on flood insurance policy choices (standard or MPPP), lender required notification letters, updates to cancellation provisions, and some noteworthy underwriting guidelines. Reference document used to compile this information is the National Flood Insurance Program Flood Insurance Manual, 2000 edition, revised May 2001/October 2001, administered by the Federal Insurance Administration, Federal Emergency Management Agency.
I. Policy Choices
Standard National Flood Insurance Program (NFIP) policies are offered at standard rates to property owners with properties located in communities participating in the NFIP as designated by the Federal Emergency Management Agency (FEMA).
Mortgage Portfolio Protection Program (MPPP) policies are offered as a tool for lending institutions to force place flood insurance to bring mortgage loan portfolios into compliance. MPPP policies are issued with less property information requirements and at a higher premium rate.
Lenders may also force place flood insurance using standard policies provided all information requirements are met and MPPP notification letter requirements are adhered to.
MPPP policies are not available on new loan originations.
Check our download page for flood quote request forms.
II. Lender Required Notification Letters For Lender-Placed Flood Insurance (MPPP or Standard)
Three notification letters are required prior to force placing flood insurance.
Letter intervals are at least 45 days prior, 15 days prior, and upon force placement.
Letter notification to the borrower is the lender/servicer’s responsibility.
MPPP Guidelines and Requirements Addendum #1, prepared and published by National Flood Services Inc., details the portfolio review letter notification process required.
III. Cancellation Provisions
Due to the seasonal nature of flooding, there are a limited number of reasons for which a flood insurance policy may be cancelled with refund. It is important to note that flood policies can not be cancelled at will. In order for a cancellation to be processed with refund of premium, an NFIP approved reason must be cited, and appropriate documentation must be submitted with the cancellation request form. Please take a moment to read the cancellation section of the NFIP Flood Insurance Manual, 2000 Edition, revised May 2001/October 2001.
Some of the new cancellation requirements effective October 1, 2001, per the Flood Insurance Cancellation/Nullification form, October 1, 2001 revision are outlined below:
Reason 4: Duplicate NFIP Policies: When a duplicate NFIP policy has been issued, only one policy can remain in effect. When coverage has been lender-placed by a lender using a conventionally written standard policy, the policy is considered equivalent to the MPPP policy, and the conventionally written standard lender-placed policy may be cancelled provided a copy of the force placement letter from the mortgagee is submitted with the Cancellation Form.
Reason 8: Policy not required by Mortgagee: This provides a means to flat cancel a policy which was requested for closing at or prior to closing, and it was determined that the property is not located in a Special Flood Hazard Area. As a result, the mortgagee does not require coverage. A statement from the Mortgagee must accompany the Cancellation Form.
Reason 16: Duplicate policies from sources other than the NFIP: A statement from the mortgagee accepting the non-NFIP policy as replacement is required.
Reason 19: Insurance no longer required by the Mortgagee because the structure has been removed from the Special Flood Hazard Area by means of a Letter of Map Amendment (LOMA) or Letter of Map Revision (LOMR): If flood insurance was required by a mortgagee or other lender because the property was determined to be in a Special Flood Hazard Area, and it is later determined that the property is no longer located in a Special Flood Hazard Area through the issuance of a LOMA or LOMR, the policy can be cancelled, provided the lender confirms in writing that the insurance was required by the lender and that the lender no longer requires retention of the flood insurance. A copy of the LOMA or LOMR must accompany this request.
There is a 30-day wait from the date premium payment is received until the effective date of the policy. The wait period can be waived if the policy is lender required.
An elevation certificate may be required when writing a standard policy with the building or substantial improvement date after the FIRM date. Although the elevation certificate is not always required, it will usually reduce the insurance rates on post-FIRM properties.
There is a one building per policy limit. Multiple buildings must be insured under multiple policies.
Flood insurance coverage is not effective prior to receipt of premium payment by the NFIP servicer.
Please note: This information is provided as a courtesy by Loan Protector. While correct to the best of our knowledge, we make no guarantee or warranty as to its accuracy, and will not be liable for any damages resulting from its use. In case of any conflict with federal, state or local statute, or NFIP guidelines or regulation, such law, regulation, or guideline takes precedence over the information contained herein. Please have your compliance and/or legal staff provide final interpretation on all NFIP regulations.