Yes/No Flood Hazard Area

[Couch Potato]

Big jump.

What I think most seem to miss is that the words "must be noted" are not the words "box must be checked yes." It is quite a jump from one phrase to the other. I know many have blindly made the leap, but I am not one of them. I think if they meant the check box, they would have used that specific wording. I believe the intent is to be sure all relevant information is in the report, not just the status of the improvements.

 

[Fritz in NY]

Guys/Girls...who contiued to add the RESPONSIBILITY of 100 year flood plain to OUR appraisal report form? I have fun with maps, real fun dealing with old govenment maps, but is it MY RESPONSIBILITY to determine flood plan data. I really do not have a surveyers license or the ability to decifer US GOV'NT Maps...I can say yes or no if subject is far from a A or X zone, but to put this obligation on an appriaser is really insane.....Why do people pay for flood certs & insurance? I always indicate that "I am not a qualified surveyer" and have "attempted to evaluate U.S. Government flood maps."

 

[AL LLANOS]

I had a situation once where the subject property site was 56,000/sf.
however the assessed site was around 18,000/sf. The owner said my property goes right into the Mojave River. He apparently owned it and had horses on it. According to the plat map, it was all his. Somehow he got around the flood zone by getting the excess land re-assessed. Anyone ever encounter this?

 

[Marcia Langley]

I'm convinced that the intent of Freddie/Fannie/FHA is for the flood box to be checked when any part of the property is in a hazard zone.

All three have changed their wording from terms like "the dwelling" or "the improvements" to the term "the property" in recent times.

Freddie Chapter 44.15
Fannie XI, 404.06
FHA D-1, section 4

The form itself and all of the publications discuss this in the site section and then use the term "the property". FHA is the only one that explicitly says "check the yes box" rather than the more vague "indicate".

I have the same memory that Dale has of the verbal instructions from Fannie back in '05 but verbal instructions to limited groups don't help much in the greater picture.

IMO this shift is in recognition that it is not the appraisers' expertise nor responsibility to determine whether or not flood insurance be required but rather the lenders' responsibility.

The appraiser reports if "the property" is in a hazard area and the lender gets whatever survey or documentation they need to determine whether insurance is needed on the impriovements.

As Brad said, the primary duty of the appraiser is to consider the impact of flood hazard on value to any part of the property. But getting the reporting part right with client expectations is important, too.

In general, I don't think a report would rise to the level of being misleading, either way, as long as all the information is on the report and has been evaluated as it affects value.

So it boils down to client expectations. I think the secondary market does expect it.

Brad and Dale (or any other users of these forms), can you tell us what the impact is on lenders when the box is checked yes versus no? Does that make it any more or less likely that you would take additional steps to determine insurance needs or do you always go full out on that, anyway?

And what difference would it make to the secondary market? Is it just a check box to indicate that the appraiser has taken any value impact into consideration? Do they also use it to trigger a check on whether the lender has done his due diligence?

Does anybody, anywhere use that check box as an automatic kick-out for further checks?

 

[Brad Ellis]

Marcia,

I'll admit that I have not compared older wording from the GSEs to current; however, that, but itself, raises this question:

IF they had intended that they want the box marked Yes if a portion of the site is in the zone, then why did they simply not just say so? After all, they were changing the wording, no? I think they really do know what the regulations require.

So, my opinion here is that they have been intentionally vague on this. Frankly, what Joe Minnich says is not always correct and he has, more than once, demonstrated a lack of ability to connect the wording in the Fannie forms to what goes on in real life.

For example, Don told us (from Joe's pronouncements) that they want REOs done on the new forms. OK, but they (the GSEs) are the ONLY ones in the servicing field who consider that valuing an REO for potential sale is a part of a mortgage financing transaction. It is simply not. And pretty much EVERYONE else involved with these consider that this is not a mortgage finance transaction.

What happened here is fairly clear. They modified the forms and neglected to consider that some forms may be needed for non-mortgage finance circumstances. So they simply say- OK use the new forms. In my view it actually could even be considered a misleading report.

So, in this case, I think Couch makes the salient point. Although some of this data may be relevant to the valuation issue, it does not automatically mean that the "box" must be checked "yes".

As to your question on funding, the answer is that no- we do not decline a loan simply because the improvements are in the flood zone. We just require the insurance- period. And we only require it if the flood cert shows the improvements in the zone. That is what the regulations state (not that isd matters all that much since the insurance programs are woefully inadequate in coverage). And yes, the cost of same would be factored into the underwriting decision- just like MI.

BTW, Fannie and Freddie buy these loans all the time- part of the site in but improvements out and with NO flood insurance at all. So, where does that leave us?

Finally, given that absolutely no one is funding loans using the appraiser's determinations (and I concur with all who say that we sometimes do not know without the topo survey), should they have not just asked us to tell them on the form if there is an impact upon value for any portion of the site due to its location in the zone?

And then what would one do if the neighbor's lot is in the zone but the subject site is not and the subject improvments are only 30 feet from the neighbor site? You could easily see that.

So, I'll be sticking to the regulations, thanks.

Brad

 

[CANative]

Neither the selling guide nor the pre-printed verbiage on the forms define "property." Since we are appraising the lot and the improvements as a single entity I will continue to check "yes" when any portion of the "property" is located with a Special FEMA Flood Hazard Area as identified on the maps available to me.

Flood certs don't cost that much and don't take very long to get.

 

[Pat Butler]

I'll continue to put an asterisk in the boxes and explain the situation in detail on a comment page whenever the subject property MIGHT be in an adverse flood zone. This is just another example of inherent problems with form reporting. If the form doesn't provide enough appropriate check boxes to fully explain the situation. I won't Fannie 'box' me into doing something wrong simply because their form doesn't have a correct field in it.

A friend of mine is a principal in a surveying company and they've done plenty of flood plain surveying for municipalities. There were some times where they were shooting bearings in excess of 500'. That means that the data can't be trusted within 500' in those areas. The lines you see on flood maps aren't reliable!

 

[Marcia Langley]

As to your question on funding, the answer is that no- we do not decline a loan simply because the improvements are in the flood zone. We just require the insurance- period. And we only require it if the flood cert shows the improvements in the zone. That is what the regulations state (not that isd matters all that much since the insurance programs are woefully inadequate in coverage). And yes, the cost of same would be factored into the underwriting decision- just like MI.

BTW, Fannie and Freddie buy these loans all the time- part of the site in but improvements out and with NO flood insurance at all. So, where does that leave us?

Brad,

I'm getting the feeling that you equate checking the yes box to requiring insurance. Am I understanding you right? Because that would not be right.

Surely no bank is requiring flood insurance without a survey? (Aside from that one story you told.)

 

[Brad Ellis]

Marcia, Greg, et al,

In the absence of definitive instructions/guidelines from Fannie (which do not exist) you will always be free to do as you wish. Creates no problems really for the bank.

As to a bank always relying upon a survey for this- no they do not- or at least I've not heard of one using thye appraisal. They rely upon the independent certifications. If a borrower wants to avoid same they may obtain such a topo survey, or request a LOMR or a LOMA. That part is really simple.

How one approaches this in a report only revolves around impact upon value and marketability. It will not be used for determining the need for or the price of the insurance.

Brad

 

[Marcia Langley]

Thanks Brad,

I was starting to think we were talking at cross purposes. Your post cleared it up for me.