A flood zone determination company provides the service of identifying the flood zone for properties. It may also provide additional services such as life-of-loan monitoring for flood zone changes. A flood zone determination company may or may not provide flood insurance.
A mortgage lender engages a flood zone determination company to obtain the Standard Flood Hazard Determination Form (SFHDF) which identifies whether a property is located in a special flood hazard area. Flood determination is required anytime a lender is making, increasing, extending, renewing or purchasing a loan to determine whether or not flood insurance is required and available on the property.
Flood zone determinations are based on the information contained in flood maps that are developed by Federal Emergency Management Agency (FEMA). From time to time, FEMA updates the flood maps which may change the flood zone designation for a particular property. A flood determination company processes the map changes and offers life-of-loan monitoring service through which it alerts the lender whenever the flood zone designation changes for the properties that secure the mortgage loans. If a property is designated to be in a Special Flood Hazard Areas (SFHA) then the lender will require the borrower to obtain flood insurance. On the other hand, if a property is no longer in a SFHA, the lender will inform the borrower so that it may cancel the flood insurance.
In order to manage the life-of-loan monitoring, the lender provides a list containing the address of all the properties that are used to collateralize its mortgage loans.
Most likely, you will never utilize the services of a flood zone determination company. At the time of origination or during refinance, the lender obtains the flood zone determination directly from a flood zone determination company of its choice.
Among other contractual considerations, you should ensure that the contract with a flood determination company address the following:
Updated: Mar 04, 2016