Jump to Content
ABA: The American Bankers Association
Skip Section Navigation

Can a bank make a loan without requiring flood insurance simply based on an elevation certificate? What are the regulatory obligations if there is a difference of opinion as to whether the building is actually located in a SFHA?

Flood Dispute. Our flood determination vendor says that a building that will secure a loan is located in a Special Flood Hazard Area (SFHA), but the applicants' insurance agent is telling them that because they have an elevation certificate reflecting changes made to the property during construction (e.g., using fill dirt to raise and level the ground where the building will be constructed or constructing the building on stilts) they are not required to obtain flood insurance. Can we make the loan without requiring flood insurance simply based on an elevation certificate? What are our regulatory obligations if there is a difference of opinion as to whether the building is actually located in a SFHA?

An elevation certificate by itself is not sufficient to waive the requirement for adequate flood insurance. As stated in the instructions to FEMA's Elevation Certificate, "Use of this certificate does not provide a waiver of the flood insurance purchase requirement. Only a LOMA or LOMR-F from the Federal Emergency Management Agency (FEMA) can amend the FIRM [Flood Insurance Rate Map] and remove the Federal mandate for a lending institution to require the purchase of flood insurance."

A property owner who wants to request either a Letter of Map Amendment (LOMA) or a Letter of Map Revision Based on Fill (LOMR-F) may do so online or via paper by completing form MT-EZ, MT-1 or MT-2, as appropriate. Fees and required documents (e.g., an elevation certificate) vary based on specific factors. If either a LOMA or LOMR-F is issued, then the FIRM is effectively amended such that the building would likely no longer be located in a SFHA and therefore, flood insurance would not be required.

To answer your second question, if there is a difference of opinion as to which flood zone is accurate, the lender and the borrower/property owner may jointly request that FEMA review the lender's determination and issue a Letter of Determination Review (LODR). This must be submitted within 45 days following the date the lender notified the applicant/borrower that the property is believed to be within a SFHA. Unlike the LOMA or LOMR-F, it does not require an elevation certificate and does not officially alter or amend the FIRM. There is, currently, a fee of $80, and it requires submission of certain information, such as a copy of the Standard Flood Hazard Determination Form (SFHDF), 'Notice to Borrower of Flood Hazard' and a letter signed by both the borrower and the lender requesting the determination.

Regardless of how it is accomplished, however, a financial institution may not "make, increase, renew or extend the loan" without either evidence of adequate flood insurance or proof that the building(s) is/are, in fact, not located in a SFHA. (May 2016)

Compliance Hotline

Have a compliance-related question? We're here to help. Members, reach us by phone or email.