Policy Documents

Mandatory Flood Insurance Purchase in Remapped Residual Risk Areas Behind Levee

Rawle O. King –
February 1, 2010

This report examines the amount of flood insurance that must be purchased (and retained) on loans secured by real property located in federally designated special flood hazard areas (SFHAs). It is written in response to three situations: (1) the Federal Emergency Management Agency’s remapping efforts that include verifying the status of all levees as providing protection against a 100-year flood, which are currently depicted on Flood Insurance Rate Maps, and widespread concerns among homeowners about new requirements to purchase flood insurance should the levee become decertified; (2) uncertainty as to whether the mandatory amount of flood insurance should be equal to the assessed value of the insured residential structure or the unpaid principal balance (UPB) of the mortgage loan; and (3) concerns that homeowners may be inappropriately asked to purchase an amount of flood insurance that is several times the value of the actual property. This report will be updated as events warrant.