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A Surge in Flood Insurance Rates

FEMA Releases Long-Awaited Maps

Article written by Jack Carr, P.E., R.S., LEED AP, Criterium Engineers
Published in Condo Media, January 2014

A storm is brewing. The red gale warning flags are flying. Time to hunker down and survey your survival equipment. No, I am not just speaking of the pending hurricane season but also the impact on coastal (and even inland) condo living with the recent release of the long-awaited Federal Emergency Management Administration (FEMA) flood maps.
These maps have been created with high accuracy from aerial photography and other means, giving some assurance of reliability, but things are not that simple in this world. What these maps do not do is confirm your particular building's relationship to future high water from rising ocean surges or the swelling of inland rivers and streams. This can have serious effects on future sales or financing condominium units.
As an example, let's say you have had a mortgage for the last seven years at 5.5 percent and you have the possibility of refinancing with your current mortgage holder at a reduced rate of 4.3 percent with no closing costs. Sounds like a no-brainer, so you start the refinance paperwork process. Then the nightmare begins.
Ever since the condo was built seven years ago, its property lot has always been in Zone C not requiring any flood insurance (as it was not in a special flood hazard area), but you maintained a $250,000 flood coverage for $500 per year, just in case. Your mortgage holder sends you a letter notifying you their due diligence processing of the new mortgage revealed the new FEMA flood maps show the road leading into the condominium's lot could reach a base flood elevation (BFE) of 1 foot from a nearby stream during a hundred year storm. This driveway and hence, by association, the entire lot is now classified into a new "AO" zone.
It gets worse. Because of the rezoning. your condominium unit is now in violation of the first mortgage's covenants, and if you do not obtain the proper flood insurance, you will be in default subject to foreclosure. Meanwhile, your mortgage company notifies your insurance company of the improper insurance level, and the insurance company sends a demand letter requiring an immediate payment of $5,000 to cover the new special hazard flood insurance.

Letter of Map Adjustment

What really irritates is you know your unit's foundation is at least 7 feer higher than the driveway's estimated BFE and water will never rise high enough to damage the building. It does not matter. You still have to send the requested $5,000 insurance premium anyway and even more money every year for the life of the mortgage. So what are you to do? The only avenue for relief at this point is to file a LOMA request with FEMA.
LOMA stands for letter of map adjustment. If you believe your condo unit's building has not been properly classified in the correct flood zone, you need to prove it by hiring a licensed land surveyor or professional engineer to make a topographical survey of the condo's property and determine the elevation of the corners of the building above the BFE and locate the building on the topographic site plan using GPS coordinates. With this site plan, photos, and other data, your surveyor files a complicated federal form with FEMA requesting a LOMA.
If successful, a few weeks later a LOMA is sent to you granting the rezoning requested, so you can seek a refund of your insurance over-payment and proceed with the refinancing process that was interrupted. Though this sounds like a nightmare, it is actually a true story.

Climate Change

This problem is just a drop in the ocean. The real problem is future climate changes will cause rising sea levels and monster storms like Sandy. Most Vermont condo owners gave very little consideration to water damage caused by a hurricane. Most property owners along the southern New England shore would not have thought a storm with maximum gusts of only 94 mph would have caused so much water damage to properties located in protected harbors and inlets. But new mega-storms have radically changed the method of predicting storm damage.
It is now recognized that the storm surge may be the biggest threat in future super storms. The larger diameter of these storms cause exceptional drops in atmospheric pressure, forcing a surge of water ahead of the storm front. This type of surge caused most of Sandy's devastation. Coastal municipal planners are preparing for this future and so should all near-water condo property owners.