(Originally published 12/04/12.)
It’s been a while since I checked my crystal ball. To be honest, its predictions have sometimes been fuzzy or even downright wrong. Nevertheless, when I recently took out my crystal ball and dusted it off, this one prediction came through clear as day: Expect changes in flood insurance requirements.
Mortgage lenders determine whether flood insurance is required by ordering a Flood Certificate from one of a number of vendors. These Flood Certificates verify a subject property’s location on FEMA’s most recently published flood maps in order to determine the property’s elevation above sea level, distance from a body of water, and subsequent risk of flooding. If the property is located in a flood zone, then flood insurance is required.
In 2013, the Federal Emergency Management Agency (FEMA) is scheduled to complete a major update of flood zone maps for shore areas, some of which haven’t had them revised in decades. These new maps make use of new laser technology that can determine land elevation to within six inches.
This could mean properties that were NOT previously considered in flood zones may now be re-designated. And homeowners – and home buyers – who previously did not require flood insurance may now have to purchase coverage. In the wake of Storm Sandy, that prospect may not be disagreeable to many. However, the one variable that’s yet to play out will be the availability and cost of flood insurance. Waiting periods for new policies are likely to increase and costs might skyrocket.
For those properties in communities that participate in the National Flood Insurance Program (NFIP), it’s most likely that National Flood Insurance will still write new policies. However, for those inland communities not commonly thought to be in a flood zone, but flooded by Storm Sandy nonetheless, we may be heading into uncharted territory.
Regardless of what next year brings, we should anticipate higher costs for flood insurance. This also means higher mortgage payments and for those marginally qualified buyers, a higher risk that their loan might not be approved.
While the Big-Box Banks experience 11th hour denials and exploding closings, by working with Mortgage Wealth Advisors, we will address these concerns with you before you go to contract. Your transaction will go smoothly. Your loan will close. And your mortgage will complement your financial needs today, while helping you attain your financial goals tomorrow.
Warren Goldberg is a Certified Mortgage Planning Specialist and a published author. His interviews include Blog-Talk Radio, Newsday, and the Long Island Herald. Since 1992, he’s been sharing his financial knowledge and wealth-building strategies, including how to properly use your mortgage as a financial tool. His clients regularly express their trust and appreciation by recommending friends and family call when in need of mortgage, real estate, and financial guidance.