Yesterday, FEMA published a rule in the Federal Register which will suspend coverage in certain communities because of noncompliance with floodplain management requirements of the program. Communities that are affected are located in Alaska, Connecticut, Iowa, Ohio, South Carolina and Virginia. The suspensions are effective August 5th for Connecticut and August 19th for the other areas.
What does this mean to your credit union? If the credit union completes its own flood zone determinations it will need to update its maps. If the credit union has a third party complete its determinations, the effect on determinations should be minimal because the third party should update its maps accordingly. From a due diligence perspective, the credit union may wish to verify that the third party has updated its information prior to requesting a determination. If the credit union obtains Life of Loan coverage from its third party, it should receive a notice for any current loans which are secured by a property in those locations. And, if a property is located in a flood zone, and it is located in one of these communities, flood insurance will not be available for your members, which may pose an increased risk to the credit union’s collateral.
If you live in the Des Moines area, like me, its hard to imagine a flood occurring given the dry summers we have had the last 2 years, but over the course of a 30 year mortgages’s lifespan, this could be an issue. If your credit union lends in the areas mentioned, be sure to check out the FEMA Community Status Book for additional information.