Flood Disaster Protection Act

The Flood Disaster Protection Act was enacted in 1974 and is regulated by the Federal Insurance Administration, and requires all lenders to ascertain before loan closing whether real estate secured by a mortgage is located within a designated flood hazard area. Lenders ascertain such information in one of two ways: by using a Flood Hazard Determination, or through information provided by an appraiser. If property is located with a designated flood hazard area, this legislation requires a borrower to be informed whether the property would be covered by insurance in the event of a flood. Whether or not the property is located in a community participating in the National Flood Insurance Program prescribes the manner in which the lender will notify the borrower. If the property is located in a special flood hazard area, the lender is required to notify the borrower of this fact, and also whether flood disaster insurance is available in that community. If this insurance is available, the lender must require the borrower to obtain tee insurance. If flood insurance is not available, the lender will generally choose not to make the loan.

National Flood Insurance Program (NFIP)

The NFIP makes federally backed flood insurance available for all buildings, whether they are in a floodplain or not. Flood Insurance covers direct loss caused by surface flooding, including a river flowing over its banks, a lake or ocean storm, and local drainage problems. The NFIP insures buildings, including mobile homes, with two types of coverage: structural and contents. Structural coverage is for the walls, floors, insulation, furnace and other items permanently attached to the structure. Contents coverage may be purchased separately provided the contents are in an insurable building.