Flood Certifications: Striking The Right Balance Between Automation And Exception Handling

Over the last decade, mortgage lenders have seen dramatic changes in how loans are approved, processed and closed with technology and automation improving speed, accuracy and the customer experience. The improvements have permeated all aspects of the mortgage life cycle, including the flood certification required for every home loan.

Automation and enhanced technology can provide immediate and accurate flood determinations for the majority of mortgage applications, but what about the exceptions? What about those homeowners whose flood risk determination changes as a result of updated FEMA flood maps?

The FEMA Risk Rating 2.0 was passed last October 1st and any policies renewed after April 1st changed how flood risk is determined and evaluated, leveraging the industry’s best practices to provide accurate flood risk to an individual property. FEMA is getting smarter with more advanced technology and efficient processes for issuing updated maps, but there will always be exceptions, especially since flooding is the most common natural hazard in the U.S. In fact, no region is safe from flooding, and all 50 states are subject to flash floods. With that much activity, exceptions are no small matter.

Proper handling of exceptions isn’t just smart, it can be the key difference in getting ahead of the pack.

FEMA typically issues revised flood zone maps two times a month, but it falls to companies that specialize in flood certifications to digitize these updated maps to ensure consistently accurate flood determinations. These continually published updates can mean big changes for homeowners. A homeowner may not have previously been in a Special Flood Zone Area, but with revised FEMA data, they now are and must carry flood insurance. Likewise, a homeowner – or potential buyer – may be in a Special Flood Hazard Area, but due to elevation that is unique to the specific property (if it’s on a mountain, for instance) or enhancements to elevation in the case of new construction (in which the builder raises elevation with earthen fill), they could be exempted from flood insurance requirements or eligible for reduced insurance rates.

For many of these exceptions, a Letter of Map Amendment (LOMA), issued by FEMA, can be an invaluable solution. There is also a Letter of Map Revision (LOMR) for larger areas, such as subdivisions and residential developments. But few homeowners are aware of the LOMA option, and many lenders and servicers don’t have the expertise or staff who can guide their homeowner-customers through the detailed process for a successful outcome.

A certified floodplain expert can help guide lenders and homeowners in the process and determine if an owner is a good candidate to secure a LOMA before the process even begins. If they are, they can help them complete all of the necessary steps, legal obligations and documentation requirements which may include:

  • LOMA Application Form
  • The property’s year of construction
  • Elevation certificate, provided by a licensed land surveyor or registered professional engineer – the lowest adjacent grade of the structure must be at or above the Base Flood Elevation
  • Plat/parcel map, FEMA Flood Insurance Rate Map with aerial
  • Recorded property deed
  • Fill Placement Yes or No

The process can take up to six weeks once data is submitted to FEMA, so FEMA created eLOMA, an electronic, web-based tool to speed up the process. As with traditional hardcopy LOMA applications, an eLOMA application must include the required technical information and other documentation to be considered. While a much quicker option, it still requires due diligence on the details so that all documentation and requirements are properly completed and submitted.

Some lenders and their homeowners want to know in advance whether a flood certification status will change, even before a FEMA map revision becomes effective. A probability scan can give them a jump on the information and reduce the timeframe from more than a month to only a few days. A probability scan is also useful for insurance carriers who use it for marketing purposes to identify potential homeowners who will be required to carry flood insurance.

Floods cause millions of dollars of damage each year, but with accurate and timely flood data, both lenders and homeowners can stay ahead of the game on flood certification and insurance requirements.