Drowning in Flood Insurance

I'm currently representing a buyer on the purchase of a townhome in Camarillo, California. Everything was going according to plan until we were confronted with discrepancies with the flood zone designation for the property. The lender had information that the property was in a high risk zone and required the buyer obtain flood insurance. Okay, cool. We'll get flood insurance.

The flood insurance issue is something I anticipated because most Realtors know that FEMA changed the flood maps for Camarillo on January 20, 2010. And, like a good Realtor, I obtained the flood zone designation from an insurer prior to having the buyer make the offer. We were confident that if the lender required flood insurance, the buyer would be able to absorb the cost because of the preferred rate.

We called a local insurance agent and obtained flood insurance through the only source available - the National Flood Insurance Program (NFIP). The insurance agent's auto-generated flood zone determination showed it was a low risk flood zone, thus the buyer was able to purchase the insurance at a preferred rate - a significant difference from a high risk rate. We send the info along to the lender and we're humming along again, right?

Not so fast...The lender's insurance department will not approve the NFIP insurance coverage because the flood zone designations between the lender and the insurance company don't match! After many rounds of discussion and email with the lender, the lender's insurance department, the insurance company, and NFIP, there was simply no desire on the lender's part to budge from their position that the zone designations must match. It didn't matter one iota that the buyer's flood insurance coverage was the same regardless of the zone designation or that the NFIP Processing Center was going to honor the insurance designation and quote from the insurer.

It does, however, matter to the buyer as this means spending another $1,000+ per year to obtain flood insurance. We do not have a happy client, which makes me very unhappy.

Now, I'm a solutions kinda gal, so I haven't given up. In working with the Home Owners Association (HOA) management company, we've been able to get the HOA board of directors to approve purchasing flood insurance for the association. The HOA's insurance agent is forwarding the proof of insurance so we can proceed to closing, albeit a bit later than scheduled.

Until then, I'll be treading water to avoid drowning in flood insurance.

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