What role do lenders play in regards to NFIP maps?

Lenders play a critical role in relation to NFIP maps by determining when flood insurance must be purchased as a condition of loans. This requirement arises from federal law, specifically in areas designated as having special flood hazards on the Flood Insurance Rate Maps (FIRMs). When a lender assesses a property, they consult these maps to identify if the structure is located in a floodplain. If it is, the lender mandates that the borrower obtain flood insurance as part of the loan agreement to protect both the borrower’s investment and the lender’s collateral against potential flood-related losses. This ensures compliance with the NFIP and helps mitigate financial risks associated with flooding.

The other roles associated with the floodplain management concept, such as creating maps or approving construction, are primarily functions of local or federal government agencies rather than lenders. Similarly, the sale of flood insurance policies is typically handled by insurance companies and not by lenders themselves. Understanding the lender's role highlights the interconnectedness of federal floodplain management policies and the financial industry's responsibilities in maintaining flood risk awareness among property owners.