For nearly every mortgage transaction in the United States that involves a structure, the lender reviews current National Flood Insurance Program (NFIP) maps for the community in which the property is located. The NFIP map review is made to determine the location of the property in relation to the Special Flood Hazard Area (SFHA). If the lender determines that the structure is indeed located within the SFHA and the community is participating in the NFIP, the borrower is notified that flood insurance will be required as a condition of receiving a loan.
These lender requirements are set forth in the Flood Disaster Protection Act of 1973 and the National Flood Insurance Reform Act of 1994. Stipulations of these legislative acts require the purchase of flood insurance by property owners who are being assisted by federal programs or by federally regulated institutions in the acquisition or improvement of land, or facilities, or structures located or to be located within an SFHA. For more information please visit our Flood Insurance page.