Answers about Flood Insurance

When can lenders or servicers charge the borrower a fee for making a flood determination?

There are four instances under the Flood Disaster Protection Act (FDPA or Act) when the borrower can be charged a specific fee for a flood determination:

  1. When the determination is made in connection with the making, increasing, extending, or renewing of a loan that is initiated by the borrower;
  2. When the determination is prompted by a revision or updating of floodplain areas or flood-risk zones by Federal Emergency Management Agency (FEMA);
  3. When the determination is prompted by FEMA’s publication of notices that affect the area in which the secured property is located; or
  4. When the determination results in force placement of insurance.

The loan agreement or other contractual documents between the parties may also permit the imposition of fees.

February 2011