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In late 2012, FHA and HUD revised and updated instructions for borrowers and lenders regarding its flood zone determination policy. FHA requires all mortgagees obtain a flood zone determination on all properties.

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FHA Loan Articles

News and Updates for Homeowners

FHA Revised Flood Zone Determination Policy

March 4, 2013 - In late 2012, FHA and HUD revised and updated instructions for borrowers and lenders regarding its flood zone determination policy. On December 11, 2012, FHA Mortgagee Letter 2012-28 was published to overrule a previous Mortgagee Letter issued in 2010 on this issue.

In the past, a borrower applying for an FHA mortgage loans was not required to have a flood zone determination on the property he or she wanted to buy. While the FHA had previously "strongly encouraged" lenders to get a flood zone determination for home purchased with an FHA insured mortgage, it was not mandatory. Until now.

FHA and HUD policy was revised, updated and re-stated in FHA Mortgagee Letter 2012-28.

According to that mortgagee letter, "FHA requires all mortgagees obtain a flood zone determination on all properties. The documentation provided to evidence the flood zone determination and retained in the case binder must clearly indicate that the flood zone determination service is for the life of the loan."

Along with this new policy, the FHA also restates its position on homes located within a Coastal Barrier Resource System-these properties cannot be purchased with an FHA loan.

Specifically, "Properties within a designated Coastal Barrier Resource System (CBRS) unit are not eligible for an FHA-insured mortgage. HUD will incorporate this restated and updated guidance into the relevant FHA Single Family On-Line Handbook. The new guidance noted above is effective for all case numbers assigned sixty days after date of Mortgagee Letter."

Borrowers and lenders alike should know that this Coastal Barrier Resource System issue is not something unique to FHA loan rules and HUD policies.

According to a previous FHA mortgagee letter, "FHA is now consistent with the Coastal Barrier Resources Act (CBRA) by prohibiting FHA Mortgage Insurance for properties located within designated coastal barriers." As suggested above, federal law prompted the revision of the original FHA loan rules with regard to properties located in these areas.

For more information about FHA policy on this matter or other areas, contact the FHA directly by dialing 1-800 CALL FHA.