This is the accessible text file for GAO report number GAO-02-396 
entitled 'Flood Insurance: Extent of Noncompliance with Purchase 
Requirements Is Unknown' which was released on June 21, 2002.



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United States General Accounting Office:



GAO: Report to Congressional Committees:



June 2002:



Flood insurance:



Extent of Noncompliance with Purchase Requirements Is Unknown:



Extent of Noncompliance with Purchase RequirementsExtent of 

Noncompliace with Purchase Requirements Is Unknown:



GAO-02-396:



Contents:



Abbreviations:



FDICFederal Deposit Insurance Corporation FEMAFederal Emergency 

Management Agency FRBFederal Reserve Board GSEgovernment-sponsored 

enterprises HMDAHome Mortgage Disclosure Act HUDDepartment of Housing 

and Urban Development IGOffice of the Inspector General MSAmetropolitan 

statistical area NFIPNational Flood Insurance Program OCCOffice of the 

Comptroller of the Currency OFHEOOffice of Federal Housing Enterprise 

Oversight OTSOffice of Thrift Supervision SFHAspecial flood hazard area 

SFHDFstandard flood hazard determination form VADepartment of Veterans 

Affairs:



United States General Accounting Office:



Washington, DC 20548:



June 21, 2002:



The Honorable Barbara A. Mikulski Chairman The Honorable Christopher S. 

Bond Ranking Member Subcommittee on VA, HUD, and Independent Agencies 

Committee on Appropriations United States Senate:



The Honorable Paul S. Sarbanes Chairman The Honorable Phil Gramm 

Ranking Member Committee on Banking, Housing, and Urban Affairs United 

States Senate:



The Honorable Charles E. Schumer Chairman The Honorable Jim Bunning 

Ranking Member Subcommittee on Economic Policy Committee on Banking, 

Housing, and Urban Affairs United States Senate:



Floods have inflicted more economic losses upon the United States than 

any other natural disaster. Since its inception 34 years ago, the 

National Flood Insurance Program (NFIP) has combined flood hazard 

mitigation efforts and insurance to protect homeowners against losses 

from floods. The program, which is administered by the Federal 

Emergency Management Agency (FEMA), provides an incentive for 

communities to adopt floodplain management ordinances to mitigate the 

effects of flooding upon new or existing structures. It offers property 

owners in participating communities a mechanism--federal flood 

insurance--to cover flood losses without increasing the burden on the 

federal government to provide disaster relief payments. Virtually all 

communities in the country with flood-prone areas now participate in 

the NFIP, and over 4 million U.S. households have flood insurance. 

Nevertheless, the President’s proposed budget for 2003 characterizes 

the NFIP as “moderately effective,” because many at-risk properties 

remain uninsured. The proposed budget establishes a goal to increase 

the number of flood insurance policies in force by 5 percent in 2003 

and would increase funding for flood zone mapping activities to better 

identify at-risk properties.



While the assessment and goal described in the proposed budget apply to 

the entire NFIP, the success of a particular component of the program-

-the mandatory purchase requirement--has been the subject of debate for 

many years. Since 1973, flood insurance has been required for 

properties located in flood-prone areas of participating communities 

for the life of mortgage loans made or held by federally regulated 

lending institutions [Footnote 1] or guaranteed by federal agencies. 

Mortgages purchased by government- sponsored enterprises (GSE) were 

also included under the National Flood Insurance Reform Act of 1994. 

[Footnote 2] In 1990, we reported that differing viewpoints had emerged 

about whether all homeowners required to obtain flood insurance 

actually had it; [Footnote 3] these differences of opinion still 

remain. Lending institutions and companies that hold or service 

mortgages on properties that must have flood insurance are responsible 

for ensuring that this insurance is purchased when the mortgage is 

originated and maintained over the life of the loan. The federal bank 

regulators overseeing these lending institutions believe that there is 

a generally high level of compliance with the flood insurance purchase 

requirements. Reports issued by FEMA’s Office of Inspector General (IG) 

and others, however, have questioned whether the requirements are being 

met, and FEMA therefore has stated that noncompliance rates might be 

significant. Still, no definitive analysis has been conducted that 

measures the extent to which property owners who are required to 

purchase flood insurance actually do so.



Concerned about whether lender noncompliance could be high, the 

Subcommittee on VA, HUD, and Independent Agencies, Senate Committee on 

Appropriations, mandated that we examine lender compliance with the 

mandatory insurance purchase requirement. Additionally, the Senate 

Committee on Banking, Housing, and Urban Affairs and its Subcommittee 

on Economic Policy asked us to review this issue. As agreed with your 

offices, this report addresses the following questions:



1. What are the bases for the differing perspectives on lender 

noncompliance?



2. What does other readily available data indicate about the extent of 

noncompliance?



3. What data would be needed to fully measure noncompliance?



To address these objectives, we spoke with and obtained information 

from FEMA, federal regulators of lending institutions, GSEs, flood zone 

determination companies, mortgage companies, and others to obtain 

perspectives and to collect readily available data on lender 

noncompliance. We also obtained and analyzed home mortgage origination 

data and flood insurance policy data for certain flood-prone areas to 

obtain an independent perspective on the extent of noncompliance at the 

time mortgages are made. However, this analysis could not match 

specific mortgages with insurance policies to determine a compliance 

level. Moreover, data were not available to determine whether insurance 

was in force at loan origination for all geographic areas or during the 

life of the mortgage loan; therefore, we could not analyze all aspects 

of noncompliance with the mandatory purchase requirements. This report 

focuses on the activities of the following regulatory agencies that 

have regulatory authority over most of the pertinent mortgage market: 

the Federal Deposit Insurance Corporation (FDIC), the Federal Reserve 

Board (FRB), the Office of the Comptroller of the Currency (OCC), and 

the Office of Thrift Supervision (OTS). We also focused on the two GSEs 

that have direct responsibility for compliance--the Federal National 

Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage 

Corporation (Freddie Mac). Our work focused only on compliance with 

mandatory flood insurance purchase requirements for residential 

properties. No analysis is provided in this report about participation 

rates in the NFIP, a measure that encompasses homeowners in flood-prone 

areas who are not required to obtain flood insurance. We testified 

about participation rates in May 2001. [Footnote 4] See appendix I for 

more details on our scope and methodology.



We conducted our review from April 2001 through April 2002 in 

accordance with generally accepted government auditing standards.



Results in Brief:



The different types of evidence collected by bank regulators and GSEs 

on the one hand, and FEMA on the other, are the bases for their 

opposing perspectives on lender noncompliance with flood insurance 

purchase requirements. Federal organizations responsible for 

overseeing lenders use bank examinations and loan portfolio reviews to 

examine a nonstatistical sample of loans for compliance. These 

organizations have uncovered few significant violations, leading them 

to believe that lenders are complying with flood insurance purchase 

requirements. In contrast, FEMA relies on its own noncompliance 

estimates that are based on data generated itself and other entities, 

limited studies it conducted, and anecdotal evidence from public 

officials and others with knowledge of the program to gauge 

noncompliance. These data have indicated to FEMA officials that lenders 

are not adequately complying with the requirements.



Our analysis of readily available data does not suggest a major 

noncompliance problem at loan origination in the highly flood-prone 

areas we reviewed. We obtained and analyzed readily available 1999 data 

on the number of new mortgages reported by lenders and new flood 

insurance policies as reported by FEMA for the nation’s most flood-

prone areas. Our comparison of the number of new mortgages and policies 

for 471 highly flood-prone areas in 17 states does not suggest that 

noncompliance was a major problem in these areas because, for most of 

the areas, more insurance policies were purchased than mortgages 

originated. In 44 locations--9 percent of the areas we analyzed--the 

data suggest there could be some noncompliance because, in those areas, 

fewer insurance policies were purchased than mortgages originated. 

However, explanations exist that may account for these areas having 

fewer new policies than mortgages, such as mortgages originated for 

condominiums, which have different flood insurance purchase 

requirements.



Property-specific data on mortgages, flood zone determinations, and 

flood insurance policies--compiled at loan origination and at various 

points during the life of the loan--would be needed to fully measure 

compliance. These data are needed to ensure that homeowners purchase, 

maintain, and do not terminate flood insurance when it is required. 

Comparing these data would allow the computation of compliance rates 

nationally, regionally, or locally and would--with an additional piece 

of data, the mortgage lender identification numbers--identify specific 

noncomplying lenders. However, there are a number of challenges to 

obtaining and analyzing these data. These challenges include 

establishing reporting requirements on lenders to provide relevant 

mortgage data, determining an appropriate authority to receive and 

compare these data, and determining the costs and benefits of obtaining 

these data. The regulators and GSEs, on the one hand, and FEMA, on the 

other, have differing viewpoints of the viability of and the need for 

obtaining these data.



We provided a draft of this report to FEMA, federal bank regulatory 

agencies--FDIC, FRB, OCC, and OTS--and GSEs--Fannie Mae and Freddie 

Mac--that are responsible for the issues discussed in this report. All 

of these organizations generally agreed that the report (1) presents an 

accurate and objective presentation of the differing perspectives on 

noncompliance with the mandatory purchase requirements and (2) narrows 

the concerns over noncompliance to the area of policy renewals and 

retention. FEMA also provided additional information regarding its 

belief that problems exist with insurance policy retention and its 

plans to address this concern. Additionally, several organizations 

provided technical comments that we considered and incorporated in the 

report where appropriate.



Background:



Created by the National Flood Insurance Act of 1968, [Footnote 5] the 

NFIP is designed to protect homeowners from flood losses while also 

minimizing the exposure of property to flood damage. To participate in 

the program, communities must adopt and enforce floodplain management 

ordinances to mitigate the effects of flooding on new or existing homes 

in special flood hazard areas (SFHA). Flood insurance is available in 

communities participating in the NFIP and is offered to eligible 

homeowners for homes and their contents. FEMA, through its Federal 

Insurance and Mitigation Administration, manages the federal flood 

insurance program and floodplain mitigation programs.



When the program was created, the purchase of flood insurance was 

voluntary. To increase the impact of the program, however, the Congress 

amended it in 1973 and in 1994 to require the purchase of flood 

insurance by many homeowners and to place the onus for ensuring 

compliance upon lending institutions. Currently, homeowners in SFHAs in 

participating communities must purchase flood insurance as a condition 

of obtaining mortgages on their homes if the loans are:



* made, increased, extended, or renewed by federally regulated lending 

institutions;



* sold to Fannie Mae or Freddie Mac; [Footnote 6] or:



* made, insured, or guaranteed by a federal agency, such as the Small 

Business Administration, Federal Housing Administration, or the 

Department of Veterans Affairs. [Footnote 7]



No definitive data on the number of mortgages meeting these criteria 

exist; however, on the basis of 1999 data reported by lenders, most 

mortgaged properties meet the above criteria and, if in a SFHA, would 

be subject to the requirements of the National Flood Insurance Act.



Federally regulated lending institutions--which make most of the 

mortgages in the United States--and loan servicers [Footnote 8] must 

ensure that, where required, flood insurance is purchased at the time 

that the mortgage is obtained and maintained throughout the life of the 

loan, or added if the residence involved is reclassified as being 

located in a SFHA. They may not make, increase, extend, or renew a loan 

secured by a structure located in a SFHA in a participating community 

unless the structure is covered by flood insurance. Lenders generally 

purchase flood zone determinations from flood zone determination 

companies that use FEMA flood maps and other data to ascertain if 

properties are situated in flood zones. The companies record the 

results of their determinations on a standard flood hazard 

determination form (SFHDF) and provide this form to lenders, who are 

required to maintain it. Figure 1 shows the process that lenders 

generally follow for obtaining and recording flood zone determinations 

as part of their mortgage approval process.



Figure 1: Flood Zone Determination Portion of the Lender Mortgage 

Approval Process:



Legend:



SFHDF standard flood hazard determination form:



Source: GAO analysis of information provided by FEMA, federal 

regulatory, insurance, and mortgage loan-servicing officials.



If a lender or servicer determines at any time during the life of the 

mortgage that a property is located in a SFHA--even if a flood zone 

remapping places it in a SFHA after the mortgage was first originated-

-the lender or servicer must ensure the purchase of the appropriate 

flood insurance.



The federal agencies that regulate lending institutions and the GSEs 

were also given certain compliance responsibilities. As required by the 

1994 amendments to the National Flood Insurance Act, the regulatory 

agencies established rules directing lending institutions not to make 

loans secured by improved real estate located in SFHAs unless flood 

insurance had been purchased. The regulatory agencies are to examine 

loans for compliance with these regulations during their periodic 

examinations of member financial institutions, using uniform policies 

and procedures for assessing lender compliance with flood insurance 

requirements. The GSEs were required to implement procedures reasonably 

designed to ensure that flood insurance coverage exists for any 

purchased loan that is secured by improved real estate located in a 

SFHA. The GSEs have established flood insurance purchase requirements 

to be followed by institutions that sell mortgages to them or service 

mortgages for them and have procedures in place to assess loans for 

compliance. Appendix II contains additional information on bank 

examination procedures and processes, and appendix III contains 

additional information on the review and audit procedures followed by 

GSEs.



Noncompliance Debate Is Based on Differing Types of Data:



Officials involved with the flood insurance program developed 

contrasting viewpoints about whether lenders are complying with flood 

insurance purchase requirements primarily because the officials use 

differing types of data to reach their conclusions. Federal bank 

regulators and officials from Fannie Mae and Freddie Mac base their 

belief that lenders are generally complying with the NFIP’s purchase 

requirements on regulators’ examinations and GSEs’ reviews conducted to 

monitor and verify lender compliance. In contrast, FEMA officials 

believe that many lenders frequently are not complying with the 

requirements, which is an opinion based largely on noncompliance 

estimates computed from data on mortgages, flood zones, and insurance 

policies; limited studies on compliance; and anecdotal evidence 

indicating that insurance is not in place where required. Neither side, 

however, is able to substantiate its differing claims with 

statistically sound data that provide a nationwide perspective on 

lender noncompliance.



Bank Exams and Compliance Reviews Are Bases for Regulators and GSEs’ 

Views on Noncompliance:



On the basis of their bank exams and compliance reviews, bank 

regulators and GSE officials believe that the rates of noncompliance 

with flood insurance purchase requirements are very low. According to 

representatives of the regulatory agencies, very few violations of 

flood insurance requirements have occurred. Moreover, according to the 

bank regulators’ 1994-2000 annual reports to the Congress, most of the 

violations found during examinations have been of a technical nature, 

such as improperly completing necessary forms or not giving borrowers 

timely notification that the property is in a flood zone before the 

loan closing date. More serious violations, such as failure to confirm 

that insurance is in place when required, or failure to obtain a flood 

zone determination for a property, have been infrequently detected 

during examinations. For example, since 1996, the bank regulators have 

levied 51 civil monetary penalties on lending institutions that 

committed serious violations of flood insurance requirements. Fannie 

Mae and Freddie Mac may force lenders who sell loans to repurchase a 

loan if their requirements for flood insurance are not met. Both 

enterprises told us that this action has rarely occurred because 

instances of noncompliance are almost always corrected by the lenders.



Similarly, the bank regulators’ examiners and managers responsible for 

conducting bank examinations that we talked to said lending 

institutions are doing a good job of complying with flood insurance 

requirements. In general, the examination process involves field 

examiners assessing a lending institution’s procedures for ensuring 

compliance with the flood insurance requirements and checking a sample 

of loan files to verify that the procedures are routinely followed. 

According to the examiners, lending institutions are familiar with the 

stipulations of various consumer compliance laws and fulfilling the 

requirements for flood insurance has become a standard procedure in 

mortgage lending. Bank regulatory and industry officials have stated 

that completing standard flood hazard determination forms and ensuring 

that borrowers obtain flood insurance for properties where it is 

required are standard business practices for lenders. They added that 

at larger lending institutions, automated systems typically track 

borrowers’ flood insurance policies throughout the life of a loan.



Nevertheless, the regulatory agencies and GSEs acknowledge that 

complete data on compliance do not exist and the data they obtain from 

bank examinations are not statistically representative of compliance 

either for the bank or the country. Regulators and GSEs do not use a 

statistical sample of loans when examining for flood insurance 

compliance. Their findings at a lending institution, or even from all 

of the lending institutions that they regulate, therefore, cannot be 

generalized to the industry. Examining for compliance with flood 

insurance purchase requirements is but one of approximately 20 

different laws and regulations--such as those relating to equal 

opportunity lending, truth-in-lending, and debt collection practices--

included in compliance examinations. Staff of one regulatory agency 

told us that obtaining a statistically valid sample for any of these 

issues would require examination of many more loans than currently 

inspected and would seriously threaten their ability to examine bank 

compliance with other requirements. They do not believe it would be 

prudent or cost-effective to review a statistically valid sample of 

loans for compliance with NFIP regulations without stronger evidence of 

widespread noncompliance.



Estimates, Studies, and Contacts with Local Officials Are Bases for 

FEMA Views on Noncompliance:



FEMA officials disagree with bank regulators and GSEs about the level 

of overall lender compliance with flood insurance requirements. 

Although FEMA officials believe that lenders have been doing a better 

job of ensuring the purchase of flood insurance in recent years, they 

also believe that noncompliance rates are still significant. FEMA 

officials base their opinion on three factors: (1) their estimate of 

the aggregate number of homeowners who live in flood zones, have 

federally backed mortgages and, therefore, are required to have flood 

insurance compared with the number of flood insurance policies in 

force; (2) a small number of relevant, but limited, studies; and (3) 

anecdotal information obtained from conversations with local government 

officials and others knowledgeable about the flood insurance program.



FEMA does not have information on the individual properties that should 

be covered by flood insurance, but it has estimated the number of 

properties that should be insured. Using that estimate, it developed an 

overall estimate of noncompliance indicating that many properties do 

not have the required insurance. According to FEMA’s estimate, in 

fiscal year 2000 nearly one out of three homes required to have flood 

insurance did not have it. On the basis of Mortgage Bankers Association 

data on homes and mortgages, U.S. Corps of Engineers data on the 

percentage of structures located in SFHAs, and its own insurance policy 

data, FEMA estimates that less than 2.9 million flood insurance 

policies have been issued for over 4.3 million mortgaged properties in 

SFHAs. According to this estimate, nearly 1.4 million--32 percent--may 

not have flood insurance. FEMA officials acknowledge that an accurate 

rate of noncompliance will not be known until mortgage data are linked 

to flood insurance policy data. They nevertheless believe that the 

estimate indicates a potentially significant noncompliance problem.



FEMA officials point out that two studies the agency conducted also 

indicate noncompliance with the mandatory purchase requirement. A 1999 

study conducted by a FEMA regional office and a 2000 study by the FEMA 

IG assessed specific areas to determine the number of homes that had 

flood insurance. [Footnote 9] The two studies examined different 

localities, but each found a portion of sampled properties--as high as 

45 percent in the regional office study--that did not have the required 

insurance, as discussed below.



* A post-disaster compliance study issued in April 1999 by one of 

FEMA’s regional offices assessed rates of noncompliance after a 1998 

flood in Vermont. The study examined 120 properties located in a SFHA 

and found that 54--or 45 percent--had mortgages from a federally 

regulated institution and should have had insurance but did not. 

Moreover, the study found that the federal government provided $500,000 

in disaster assistance to these properties--assistance funds that would 

not have been paid had these properties been insured.



* An August 2000 IG study examined the rate of noncompliance for 4,195 

residences located in SFHAs in 10 states. The study found that for 

these residences, about 416--or 10 percent--were required to have flood 

insurance but did not. For example, a North Carolina subdivision that 

had been built in a SFHA in 1996 contained 27 uninsured homes of which 

20 had a mortgage from a federally regulated lending institution. The 

study also noted that statistics for that state showed that of about 

150,000 structures located in SFHAs, only 33 percent were covered by 

flood insurance.



In addition to these analyses, FEMA officials cite the results of 

studies conducted by private companies after presidentially declared 

disasters in North Dakota and Kentucky that found that from 28 to 38 

percent of the properties sampled did not have flood insurance. 

[Footnote 10]0 While neither of these studies took into consideration 

whether the homeowners without flood insurance had mortgages from 

regulated lenders, FEMA officials believe that it is reasonable to 

assume that this indicates a potential problem with compliance since a 

large percentage of the homes in this country have mortgages from 

regulated lenders.



Finally, FEMA officials stated that their concerns about lender 

compliance are bolstered by anecdotal evidence they have obtained 

during FEMA- sponsored workshops and field visits and from insurance 

and flood zone determination industry officials. For example, during a 

NFIP lender- training workshop that we observed, bank employees 

discussed with FEMA officials examples of noncompliance that were known 

but not corrected. The bank employees said that they have observed 

instances in which other bank officials discovered that a home required 

flood insurance when its owner sought to refinance the mortgage it had 

with the bank. When the owner decided not to refinance, the bank 

officials did not require the purchase of the flood insurance to 

protect the existing loan, even though the law mandates such purchase. 

Similarly, when providing assistance in presidentially declared 

disaster areas, FEMA officials have heard accounts of flood victims who 

should have been required by their lender to have flood insurance but 

were not told that they needed it. Moreover, representatives of the 

insurance and determination industries told us they consistently 

informed FEMA that they believe the extent of noncompliance is a 

problem.



FEMA officials acknowledge that their opinions on compliance are based 

on limited data. Nevertheless, they believe that the preponderance of 

information available to them indicates that lenders are not fully 

ensuring compliance with flood insurance purchase requirements.



GAO Analysis of Available Data Suggests Noncompliance Could Be Low at 

Loan Origination:



To be in compliance, the purchase of mandatory flood insurance must 

occur when a mortgage is originated, and this insurance must be 

retained and renewed over the life of the loan. No data were readily 

available to enable us to assess noncompliance at both loan origination 

and over the life of the loan and in all geographic areas. However, 

other readily available data we obtained suggest that in highly flood-

prone areas, noncompliance could be low at loan origination. We 

compared the number of new mortgages made in 1999 with new flood 

insurance policies issued in certain of the nation’s most highly flood-

prone census tract areas. For that period and for most of the 

geographic areas we examined, this comparison did not suggest a major 

noncompliance problem at loan origination, because only 44--9 percent 

of the 471 census tracts we analyzed--showed fewer insurance policies 

than mortgages. Moreover, buildings such as cooperatives and 

condominiums--which are under different purchase requirements--exist 

in some of these areas and could account for fewer policies than 

mortgages being issued.



To obtain a perspective on the level of noncompliance with the 

mandatory flood insurance purchase requirements at loan origination, we 

first identified highly flood-prone census tracts [Footnote 11]1 where 

90 to 100 percent of the properties are located in SFHAs. We then 

compared data reported by lenders [Footnote 12]2 on new mortgages made 

in 1999 by federally regulated lending institutions or guaranteed by a 

federal agency with FEMA data on new flood insurance policies issued in 

that year in each selected tract. These data, in the aggregate, do not 

suggest that noncompliance is widespread at the time of loan 

origination in highly flood-prone areas. For the 471 census tracts we 

selected, located in 64 different counties, over 88,000 insurance 

policies were issued in 1999, or about 88 percent more than the 47,000 

mortgages originated in those census tracts during that period. A 

summary, by county and state, of the census tract data we examined is 

contained in appendix IV.



Most of the census tracts had more new insurance policies purchased 

than mortgages originated. Of the 471 census tracts we analyzed, 413 

had more new insurance policies issued than mortgages, and in many of 

the census tracts substantially more flood insurance policies were 

purchased than mortgages originated. For example, nearly 4 times more 

flood insurance policies were purchased than new mortgages originated 

in census tracts in 6 of the 64 counties. Two reasons for this could be 

that some homeowners in the census tracts who did not have new 

mortgages purchased insurance or that unregulated lenders originated a 

significant number of mortgages in those areas and also required the 

purchase of flood insurance. We contacted flood zone administrators for 

2 of these counties, and they attributed the large number of insurance 

policies purchased to many factors, including an increasing awareness 

of flood dangers resulting from hurricanes affecting their counties 

during 1999 as well as recent public outreach and education efforts.



Our analysis does suggest that a noncompliance problem at loan 

origination might exist in some geographic areas. For counties 

containing 44 of the census tracts--9 percent of the tracts we 

examined--we were able to determine that there were fewer insurance 

policies issued than mortgages. For example:



* In a Hawaii county that has 5 census tracts that are virtually 

entirely in a SFHA, 357 loans were made but only 88 flood insurance 

policies were issued.



* In a New Jersey county with 4 census tracts that are virtually 

entirely in a SFHA, 291 loans were made but only 81 flood insurance 

policies were issued.



* In a New York county with 1 census tract with 97 percent of the 

properties in a flood zone, 98 mortgage loans were made but only one 

new insurance policy was issued.



However, floodplain managers in the states mentioned above point out 

that these areas are densely populated and contain many buildings that 

are condominiums or, in the case of New York and New Jersey, 

cooperatives. These structures have different purchase requirements 

than other residential properties. For example, condominium owners may 

not have to obtain a flood insurance policy if the building’s 

condominium association has purchased one that covers the entire 

structure. Consequently, there would be fewer flood insurance policies 

than new mortgages in those situations.



For the remaining 14 census tracts we analyzed, we also found that 

there were fewer insurance policies than mortgages issued. However, 

these census tracts are in counties where a number of insurance polices 

were issued that could not be identified with any specific census tract 

and which could account for the shortage of policies as compared with 

mortgages. For example, in a North Carolina county with one census 

tract that had 37 mortgages and only 15 insurance policies issued, 

there were also 201 insurance policies that could not be identified 

with any of the six census tracts in the county. It is possible that a 

portion of these policies were actually for properties in the highly 

flood-prone census tracts in these counties.



We discussed our analysis of mortgage and insurance data with officials 

of the bank regulatory agencies, GSEs, and FEMA. The regulatory and GSE 

officials stated that the analysis supports their position that few 

concerns exist regarding noncompliance with flood insurance purchase 

requirements. They stressed that they are confident that their 

examination procedures are effective and appropriate. Additionally, 

they said that our data were from 1999, before some of the regulators 

had completed examinations of all institutions they oversee to assess 

them for compliance with the current requirements. They believe that 

any noncompliance that may exist will be further reduced after all 

institutions have been examined and made fully aware of the flood 

insurance compliance requirements.



FEMA officials agreed that the analysis indicates relatively low levels 

of noncompliance at the time loans are made and that on the basis of 

our analysis, noncompliance at the time of loan origination is not an 

area of major concern. Nevertheless, they still believe that 

significant noncompliance problems exist with insurance policy 

retention and renewal. They believe that lenders and homeowners fail to 

ensure that the insurance policies remain in force for the life of the 

loan and pointed out that our analysis was unable to examine existing 

mortgages to determine if insurance policies are being retained and 

renewed as required over the life of the loan.



Mortgage, Flood Determination, and Insurance Policy Data Needed to 

Fully Assess Compliance, but Challenges Exist:



Property-specific data on mortgages, flood zone determinations, and 

flood insurance policies--obtained both at loan origination and at 

various points during the life of the loan to ensure the insurance 

remains in force--would be needed to fully assess compliance. Comparing 

these data would allow computation of compliance rates nationally, 

regionally, or locally and would--with an additional piece of data, the 

mortgage lender identification numbers--identify specific noncomplying 

lenders. However, there are a number of challenges to obtaining and 

assessing these data. These include establishing data reporting 

requirements for lenders to provide relevant mortgage data, designating 

an organization to receive and compare these data, and determining the 

costs and benefits of obtaining these data. The regulators and GSEs, on 

the one hand, and FEMA, on the other, have differing viewpoints of the 

viability of and need for obtaining these data.



Mortgage and Flood Zone Determination Data Would Need to Be Linked to 

Flood Policy Data to Measure Compliance:



The three data elements that would have to be linked to fully measure 

compliance are property addresses, flood zone determinations, and proof 

of flood insurance for those properties. Property addresses would need 

to be obtained for those properties financed by mortgages covered by 

the NFIP legislation, namely, those made by federally regulated lending 

institutions or guaranteed by federal agencies, or those purchased by 

GSEs. At the time the loan is made, flood zone determinations for 

properties associated with those mortgages are required to be performed 

by the lender--making it possible to identify the pool of mortgages for 

which flood insurance is required. Once this pool of mortgages is 

identified, it would be necessary to match the individual mortgages to 

the flood insurance policies issued to determine whether insurance 

policies had been issued for those properties required to have them. 

The results could be used to (1) compute compliance rates nationally, 

regionally, and locally and (2) identify individual properties without 

flood insurance at origination.



To monitor the status of compliance over the life of the mortgage, 

updated mortgage and insurance information would be needed. Mortgages 

are frequently sold and therefore held by a different entity. 

Similarly, the status of flood insurance policies may change. 

Currently, there are requirements for various notifications when these 

events occur, and these changes are required to be recorded in loan 

files.



Collection of an additional data element--lender identification 

numbers-- would permit measurement of noncompliance on lender specific 

levels. Lender identification numbers are necessary for identifying the 

specific lender associated with a mortgage and for determining the 

appropriate federal regulator. Obtaining lender identification numbers 

would reveal which lenders did not ensure that flood insurance was 

purchased and maintained when required.



Challenges Exist to Fully Measure Compliance:



A number of challenges exist to collect and assess the data needed to 

determine compliance. First, reporting requirements would be needed to 

centrally collect data components to determine if flood insurance is 

being purchased as required when mortgages are originated. As 

previously explained, for each mortgage originated by a regulated 

lending institution or purchased by a GSE, key data identifying the 

specific mortgaged property (i.e., property address), the flood zone 

determination for the property, and proof of insurance for properties 

in SFHAs would need to be compiled. Lenders, FEMA, and others currently 

hold all or parts of these data. For example, lenders maintain all of 

these data in their loan files, and FEMA maintains a database that 

contains all insurance policy data. Consequently, no new data would 

have to be generated, but they would have to be centrally reported.



Second, a single organization would need to be assigned the 

responsibility for measuring compliance. This organization also would 

need to have appropriate authority to collect the data needed to 

measure compliance. Although some organizations have various 

authorities to obtain data--for example, the bank regulators can 

collect data from lenders, and FEMA can obtain data from insurers--no 

organization currently has the authority to collect from lenders, 

insurance companies, or other organizations all the data needed to 

fully measure compliance. Specific legislative authority may be needed 

to enable a single organization to collect the data necessary to 

measure compliance.



Third, costs and benefits would need to be fully explored to determine 

whether establishing a new system for measuring compliance is 

justified. The regulators and GSEs, on one hand, and FEMA, on the 

other, have differing viewpoints on the viability of and need for 

obtaining compliance measurement data. In this regard, regulatory and 

GSE officials said that this effort would result in significant costs 

for lending institutions if they were required to report all flood 

insurance-related mortgage data. An official from one regulatory agency 

pointed out that although there are no data on the costs of 

implementing new reporting systems, any new data requirement placed on 

lenders would result in changes to the lenders’ information systems. 

The official estimated that costs could be in the millions of dollars 

for even minimal changes, and for institutions that have older systems, 

or that are not highly automated, additional data reporting 

requirements could have a significant impact.



The regulatory and GSE officials also said that in addition to concerns 

that obtaining this compliance measurement data would be costly, they 

also believe that little benefit would be obtained through such action. 

They stated that there continues to be no empirical evidence that there 

is any widespread noncompliance with flood insurance requirements, and 

that in fact, our analysis points to a high level of compliance. 

Officials from these organizations added that as they do their 

compliance examinations and reviews of lenders, they look at a sample 

of a lender’s entire portfolio of mortgages--both new and existing--and 

if these examinations and reviews are ensuring compliance at 

origination, they are also ensuring compliance over the life of the 

mortgage loan. Consequently, according to these officials, without 

further evidence of noncompliance problems, establishing a new process 

to require reporting and monitoring of flood insurance data is not 

justified.



Officials from many of the regulatory agencies believe that instead of 

establishing a new compliance measurement program, it would be better 

to have FEMA use the data it currently has to measure compliance and to 

conduct additional post-disaster compliance studies. The officials 

stated that FEMA has significant data on mortgages requiring flood 

insurance, and that additional data to measure compliance could be 

obtained from the insurance agents that sell flood insurance policies. 

They further said that conducting compliance studies after disasters 

have occurred could determine if there were any significant amounts of 

noncompliance in the affected area. They added that more of these 

studies would better determine if there actually are noncompliance 

problems and help pinpoint geographic areas in which they may need to 

shift greater focus to flood insurance compliance in their examination 

activities.



FEMA officials, however, believe that establishing a comprehensive 

noncompliance measurement program may be beneficial and appropriate. 

They said that they remain concerned that insurance policies are not 

being retained and renewed where required on existing mortgages, as 

their data show that the retention rate for flood insurance policies is 

about 90 percent, which is below the insurance industries’ homeowners 

policy retention rate of 95 percent. The FEMA officials said that if 

lenders were adequately ensuring the renewal of flood insurance 

policies, the retention rate would be similar. Therefore, they believe 

that only a comprehensive program that gathers and analyzes data on 

existing mortgages will resolve the debate over noncompliance and 

ensure that both property owners and the federal government are 

adequately protected. FEMA officials added that because FEMA is 

involved in the selling of insurance policies and in the financial 

condition of the insurance program, a comprehensive noncompliance 

measurement program might more appropriately rest outside of FEMA in an 

organization that would be more independent.



Additionally, FEMA officials stated that with the provisions in the 

president’s proposed budget that will significantly increase their 

efforts to remap and update the nation’s flood zones, establishing a 

process to identify noncompliance is even more critical. They pointed 

out that the remapping efforts will likely place more properties in 

SFHAs, and more property owners--including those with existing 

mortgages--will be required to purchase flood insurance. They expect 

that this remapping will result in potentially more noncompliance, and 

that a comprehensive noncompliance monitoring effort will be needed to 

ensure that all owners of properties requiring flood insurance purchase 

such insurance.



Finally, FEMA officials said that conducting post-disaster studies is 

not the solution to the noncompliance debate. They said that post-

disaster studies can only offer a limited perspective on noncompliance 

and do not address noncompliance issues for the nation as a whole. 

Moreover, a major flaw with this approach would be that FEMA would be 

identifying noncompliance when it is too late--after the disaster has 

occurred and uninsured properties are flooded. They said that it is 

much more important to identify noncomplying properties before they are 

damaged in a disaster, thereby providing the opportunity to ensure that 

property owners have insurance protection and minimizing the need for 

federal disaster assistance for these properties. Lastly, FEMA 

officials said that conducting post-disaster studies is very resource 

intensive. They said that they do not have the resources and 

capabilities to conduct any significant number of compliance studies.



Agency Comments and Our Evaluation:



We provided a draft of this report to FEMA, regulatory agencies--FDIC, 

FRB, OCC, and OTS--and GSEs--Fannie Mae and Freddie Mac--that are 

responsible for the issues discussed in this report. All of the 

agencies generally agreed that the report presents an accurate and 

objective presentation of the differing perspectives on noncompliance 

with mandatory flood insurance purchase requirements. FEMA, FDIC, FRB, 

Fannie Mae, and Freddie Mac provided letters commenting on the draft 

that appear in appendixes V, VI, VII, VIII, and IX. OCC and OTS 

provided clarifying language and technical comments that were 

incorporated into the report as appropriate.



Three organizations provided additional perspectives and comments. FEMA 

said that it continues to believe that significant problems exist with 

insurance policy retention. It stated, as an example, that last year’s 

gains in new policies were offset by attrition from the previous years’ 

number of policies in force. FEMA also described a number of strategies 

it has initiated to improve policy retention. These strategies include 

working with the regulatory agencies and GSEs to identify actions FEMA 

could take to improve lender compliance; assessing state escrow laws 

and systems to determine whether obstacles to flood insurance escrow 

exist and, where necessary, work with states to resolve these 

obstacles; and improving its flood insurance public education and 

advertising campaign.



FRB maintained that compliance is generally satisfactory with the 

institutions they supervise. It said that our analysis suggests low 

levels of noncompliance at loan origination and that the report helped 

narrow any future inquiry on lender noncompliance to areas of policy 

renewal and retention. FRB added that on the basis of years of 

experience in examining state member banks, it believes that those 

banks have a good record of compliance with flood insurance purchase 

requirements not only at loan origination but also during the time the 

banks own the loan.



Freddie Mac commented that certain facts contradict FEMA’s assertions 

that noncompliance is substantial. Specifically, Freddie Mac noted that 

FEMA acknowledges that compliance at origination is high and 90 percent 

of policies are renewed. Therefore, it sees no basis for FEMA’s belief 

that noncompliance is substantial; rather, the evidence suggests that 

noncompliance is marginal. Additionally, Freddie Mac commented that 

FEMA should take a more proactive role in compliance monitoring by 

collecting and analyzing data currently available to it and conducting 

investigations to determine reasons for noncompliance. Freddie Mac said 

that it does not share FEMA’s belief that having responsibility for 

compliance creates a conflict of interest with its responsibility for 

managing the National Flood Insurance Program.



We will send copies of this report to the Director, Federal Emergency 

Management Agency; Chairman, Federal Deposit Insurance Corporation; 

Chairman, Board of Governors of the Federal Reserve System; Comptroller 

of the Currency; Director, Office of Thrift Supervision; Chairman and 

CEO, Fannie Mae; and Chairman and CEO, Freddie Mac. We will also make 

copies available to others upon request. In addition, this report will 

be available at no charge on the GAO Web site at http://www.gao.gov . 

If you have any questions about this report, please call me or John 

Schulze at (202) 512-2834. Key contributors to this report are listed 

in appendix X.



JayEtta Z. Hecker Director, Physical Infrastructure:



Appendix I Objectives, Scope, and Methodology:



Federal Emergency Management Agency (FEMA) officials and bank 

regulators disagree about whether lenders are fully complying with the 

flood insurance purchase requirements of the National Flood Insurance 

Program (NFIP). Given this disagreement, and concerned that lender 

noncompliance could be high, the Subcommittee on VA, HUD, and 

Independent Agencies, Senate Committee on Appropriations, directed us 

to examine whether lenders are complying with the purchase 

requirements. In response to that mandate and to requests from the 

Senate Committee on Banking, Housing, and Urban Affairs and its 

Subcommittee on Economic Policy, we focused our work on the following 

questions:



1. What are the bases for the differing perspectives on lender 

noncompliance?



2. What does other readily available data indicate about the level of 

noncompliance?



3. What data would be needed to fully measure compliance?



To obtain an overall understanding of the NFIP, we analyzed the 

program’s history, regulations, policies, and procedures. We 

interviewed and gathered studies from FEMA officials, federal 

regulatory agencies, government- sponsored enterprises (GSE), flood 

zone determination companies, mortgage companies, mortgage servicers, 

insurance companies, and industry associations. We examined reports 

issued by the FEMA Inspector General and documents from FEMA’s Federal 

Insurance and Mitigation Administration. In addition, we interviewed 

this organization’s former Administrator, Acting Administrator, 

Director of Marketing, Lender Compliance Officer, and other officials 

responsible for administering the NFIP. We also interviewed FEMA’s 

Assistant Inspector General who is responsible for that office’s flood 

insurance compliance review.



To address the first objective, we determined how four regulatory 

agencies and two GSEs monitor lender compliance. Specifically, we 

focused on the Federal Deposit Insurance Corporation (FDIC), the 

Federal Reserve Board (FRB), the Office of the Comptroller of the 

Currency (OCC), the Office of Thrift Supervision (OTS), the Federal 

National Mortgage Association (Fannie Mae), and the Federal Home Loan 

Mortgage Corporation (Freddie Mac). [Footnote 13]3 We interviewed 

officials from each of these agencies, including 25 field managers and 

bank examiners from the FDIC, FRB, OCC, and OTS. In addition, we 

analyzed examination files from the FDIC, Federal Reserve Bank of New 

York, OCC, and OTS to identify banks and thrifts that had been 

subjected to civil monetary penalties and other enforcement actions; we 

further examined correspondence between the GSEs and servicers. We also 

observed FDIC and OTS bank examinations in the Baltimore, Md., area to 

better understand the policies and procedures of such examinations.



Additionally, we reviewed FEMA’s data and efforts to measure and assess 

noncompliance. We interviewed officials from FEMA’s Federal Insurance 

and Mitigation Administration and obtained information and 

documentation of FEMA’s estimates on overall levels of noncompliance; 

processes it uses to estimate structures in special flood hazard areas; 

processes it uses to collect, report, and share flood insurance policy 

data; and actions it has taken to inform the public about floodplain 

mapping and compliance with mandatory purchase requirements. We 

interviewed FEMA officials and flood zone determination industry 

officials and obtained information and documentation on studies about 

levels of participation in the NFIP and lender compliance issues. We 

attended meetings and training sessions held by FEMA with insurance 

officials, local government officials, and lender representatives and 

observed discussions of noncompliance.



In determining what other readily available data indicates about the 

level of noncompliance, we found that the data necessary to assess 

lender noncompliance are currently not reported in a way to permit full 

evaluation of this issue. However, we did determine a methodology that 

would enable us to obtain a perspective on noncompliance at loan 

origination. We compared the number of new mortgages made with the 

number of flood insurance policies issued in the same locations, in 

certain of the nation’s highly flood-prone areas. This analysis 

required that we (1) identify flood- prone areas; (2) determine the 

number of new mortgages made in such areas that were subject to NFIP 

regulations; (3) determine the number of flood insurance policies 

written; and (4) compare the number of mortgages with the number of 

flood insurance policies in certain areas to infer levels of lender 

noncompliance in those selected areas. Data on properties with existing 

mortgages in these flood-prone areas were not available; therefore, we 

did not perform any analysis on the level of noncompliance on existing 

mortgages. Further, we did not perform any analysis of the accuracy of 

the determinations made by flood zone determination companies and used 

by lenders as the basis for whether flood insurance is required.



Flood-Prone Area Data:



For our review, we defined as “flood-prone areas” all census tracts in 

which 90 percent or more of the tract is in a flood zone. To identify 

these census tracts, we used the percentage of properties determined to 

be flood-prone as a proxy for the percentage of each census tract area 

that may be flood- prone. We obtained data on flood zone determinations 

from Transamerica Flood Hazard Certification, Inc., which has been 

collecting information on properties in the United States since 1977. 

Its database consisted of about 62 million properties nationwide for 

which flood determinations have been made. Of those properties, 2.8 

million, or 4.6 percent, have been certified as located in flood hazard 

areas. We obtained this information by state, county, and census tract.



Transamerica’s data covered properties in 59,506 census tract areas. 

About 1 percent (742) of these census tracts had at least 90 percent of 

the properties determined to be in SFHAs. We focused on these 742 

census tract areas.



Mortgage Data--All New Mortgages in 1999 That Were Subject to NFIP 

Regulations:



To identify the number of new mortgage loans that would be covered by 

NFIP regulations in the flood-prone census areas, we used Home Mortgage 

Disclosure Act (HMDA) data that regulators collected for the 1999 

calendar year. The HMDA information shows the number of loans granted 

during 1999. We refined the number of mortgages to be included in our 

analysis by choosing only owner occupancy and single-family loans 

subject to government regulation. We excluded business loans, 

unregulated loans not purchased in the secondary market by either 

Fannie Mae or Freddie Mac, and loans that were designated for home 

improvements, multifamily dwellings, and refinances. This resulted in a 

total of 3,717,735 mortgage loans in 1999. We then aggregated all loan 

originations at the census-tract level.



Flood Insurance Data:



To identify the number of flood insurance policies written for the 

flood- prone census-tract areas, we used NFIP data that FEMA collects 

from insurance companies that issue policies. We obtained from FEMA a 

database that aggregated the number of flood insurance policies written 

in 1999 according to the state, county, and census tract of the 

property. To obtain policy data that would be comparable to mortgage 

data, we refined the policy data to include only new policy 

transactions for principal residences. We excluded policies that were 

not for a homeowner’s principal residence or were only to cover the 

contents of a property. This resulted in a total of 549,255 policies 

for 1999. [Footnote 14]4 These data were aggregated at the census-tract 

level.



Analysis of the Census- Tract, Mortgage, and Flood Insurance Data:



To determine whether the number of flood insurance policies in force 

approximated the number of regulated mortgage loans made in flood-prone 

areas, we merged the three types of data described above by census 

tract within each state and county for 1999. We assumed that the 

distribution of the properties, loans originated, and insurance 

policies written were the same within each census tract area.



As previously indicated, we focused on those 742 census tract areas 

that had at least 90 percent of their properties in flood areas. To 

provide a greater degree of confidence that the data we obtained were 

representative of the entire census tract, we developed additional 

selection criteria whereby at least 20 loans had been made in that 

census tract and at least 100 properties within the census tract had 

flood-zone determinations. As a result, the number of census tracts we 

examined totaled 471 covering 17 states. For these areas, we found that 

46,965 loans had been made and 88,300 flood insurance policies had been 

issued. [Footnote 15]5:



We did not attempt to independently verify the accuracy of the data 

sets used for our analysis. We did, however, to the extent possible, 

assess the reliability by (1) performing electronic tests (as described 

below) and (2) discussing results of the testing and analysis with 

knowledgeable individuals. We cross-checked Transamerica’s 

determination data with data from another flood zone determination 

company (Geotrac of America, Inc.) to determine if both companies’ data 

identified the same flood-prone census tracts. We found a high degree 

of correlation between the data of the two flood zone determination 

companies. We also determined that the variables we used from the HMDA 

data was complete in its coding and did not have questionable outliers. 

Therefore, we determined that the data were reliable enough for the 

purposes of this report.



To determine what data would be needed to fully measure compliance, we 

analyzed the processes established by the participants in the NFIP to 

collect, report, and share data on lender compliance with flood 

insurance purchase requirements. We interviewed officials and gathered 

documents from the Federal Insurance and Mitigation Administration, 

federal regulators, GSEs, loan servicers, insurance companies and their 

servicers, and related industry associations, including the National 

Floodzone Determination Association, the Independent Bankers 

Association of America, and the Mortgage Bankers Association. We made 

site visits to flood zone determination companies in Austin and 

Arlington, Tex.; Lakewood, Colo.; and Hasbrouck Heights, N.J.; and 

interviewed officials with a flood zone determination company in 

Norwalk, Ohio. These companies represent about 80 percent of the flood 

zone determination market.



After determining how information pertaining to compliance is 

processed, we developed a process that would allow better measurement 

of noncompliance with the mandatory flood insurance purchase 

requirements. We then discussed this process with FEMA and bank 

regulatory officials to obtain their perspective on its viability, 

costs, and benefits.



We conducted our review from April 2001 through April 2002 in 

accordance with generally accepted government auditing standards.



Appendix III [End of section]



Federal financial institution regulators have primary responsibility 

for ensuring that the institutions they supervise comply with the 

requirements of the National Flood Insurance Program. The regulators 

have issued uniform flood insurance regulations and examination 

procedures for enforcing and monitoring lender compliance. The policies 

and procedures are designed to ensure that flood zone determinations 

for mortgaged properties are performed, flood insurance is obtained 

when required, and flood insurance policies remain in force for the 

life of the loan.



The National Flood Insurance Reform Act of 1994 directed that 

regulatory agencies promulgate rules to implement the act’s provisions 

and to coordinate their development through the Federal Financial 

Institutions Examination Council. The agencies’ regulations became 

effective on October 1, 1996, and established, among other provisions, 

new requirements for escrowing flood insurance premiums, documenting 

flood hazard determinations on the Standard Flood Hazard Determination 

Form, and “force-placing” flood insurance under certain circumstances.



In November 1996, the regulators adopted uniform procedures for 

assessing lender compliance with the new flood insurance regulations. 

These procedures require that for the flood insurance component of the 

examinations the regulators assess:



* whether an institution performs required flood determinations for 

home mortgage loans, including mobile homes affixed to a permanent 

foundation;



* if the institution requires flood insurance in the correct amount 

when it makes, increases, extends, or renews a covered loan;



* if the institution provides the required notices to the borrower 

whenever flood insurance is required as a condition of the loan;



* if the institution requires flood insurance premiums to be escrowed 

when other items, such as hazard insurance and taxes, are required to 

be escrowed; and:



* if the institution complies with the forced placement provisions in 

cases where flood insurance on the loan is not sufficient to meet the 

requirements of the regulation.



To fulfill these requirements, bank examiners review a sample of loan 

files to verify that flood insurance requirements are met. For smaller 

banks and thrifts, which make few mortgage loans, the sample may 

consist of all loans made since the last examination, and all loans in 

the portfolio known to be secured by properties in special flood hazard 

areas. For larger institutions, examiners review a nonprojectable 

sample of loans. Depending on the findings from those files, an 

examiner may analyze additional loans for further examination. If a 

lender appears to have failed to require adequate flood insurance 

coverage on selected loans, it may be required to conduct a review of 

its entire loan portfolio and report the results to the bank regulator. 

If violations of the flood insurance requirements are detected during 

an examination, corrective action may be required of the lender, and 

fines can be levied against the lender by the regulatory organization 

if it finds a pattern or practice of violations.



Bank regulators perform compliance examinations on a periodic basis, 

generally every 12 to 60 months. In addition to compliance with flood 

insurance requirements, these examinations cover compliance with other 

consumer laws and regulations. The length of time between examinations 

is determined by several factors, including the bank’s rating at the 

time of its last examination and the size of the institution. In 

addition to regular examinations, examiners are to follow-up with 

institutions in which violations have been found to verify that any 

violations noted during the most recent examination have been resolved.



Appendix V [End of section]



The 1994 National Flood Insurance Reform Act directed Fannie Mae and 

Freddie Mac to implement procedures designed to ensure that loans that 

they purchase are covered by flood insurance for the term of the loans. 

While GSEs have no regulatory authority over their sellers and 

servicers, they require their sellers and servicers to comply with the 

flood insurance requirements through their contracts with them. These 

requirements are spelled out in the GSEs’ Seller/Servicers Guides.



Fannie Mae and Freddie Mac also require that servicers have processes 

in place that allow the servicer to identify map changes, determine 

which mortgaged dwellings affected by map changes need flood insurance, 

and to ensure that the affected borrowers obtain such insurance within 

120 days of the effective date of the map change.



If Fannie Mae or Freddie Mac finds that a lender is not complying with 

their requirements for flood insurance, they may require that the 

lender repurchase the loans and correct deficiencies in their system 

for ensuring compliance. Officials from both enterprises told us that 

this occurs very rarely.



The act also directed the Office of Federal Housing Enterprise 

Oversight (OFHEO), an independent agency within the Department of 

Housing and Urban Development responsible for regulation of Fannie Mae 

and Freddie Mac, to assess whether they have adopted and are adhering 

to flood insurance compliance procedures, and to report on this 

assessment in OFHEO’s annual reports to Congress for 1996, 1998, and 

2000. OFHEO reported that the policies and procedures established by 

Fannie Mae and Freddie Mac with respect to the flood insurance 

requirements under the Flood Disaster Protection Act were adequate and 

were being used.



The review procedures for flood insurance established by Fannie Mae and 

Freddie Mac are explained below.



Fannie Mae:



* Post purchase review: Flood insurance compliance is incorporated as 

part of the monthly quality control reviews of a nonprojectable sample 

of recently purchased or securitized mortgages. Lists of property 

addresses are sent to two flood zone determination companies to review 

the flood zone determinations on file for properties both in and 

outside of flood zones. The mortgage file is checked to verify that a 

copy of the special flood hazard determination form is present; the 

loan is coded properly; and, if appropriate, evidence that flood 

insurance coverage was obtained.



* Portfolio review: On an annual basis, Fannie Mae performs a review on 

a sample of all loans it owns or has securitized to verify that sellers 

and servicers appropriately obtained and have maintained flood 

insurance, as applicable, throughout the term of the mortgage. The 

scope of the review emphasizes areas where flood zone remapping has 

occurred, or communities whose participation status in the National 

Flood Insurance Program has changed, to ensure that sellers and 

servicers are in compliance with the requirement to have procedures in 

place to monitor such changes. For a nonprojectable sample of mortgages 

in special flood hazard areas, sellers and servicers are required to 

provide documentation to confirm that flood insurance is in force for 

each selected mortgage, and that the mortgages were properly identified 

at delivery.



* Quality control operational review: Fannie Mae regional offices 

perform regular quality control reviews that examine sellers and 

servicers’ management, policies, and procedures, rather than examining 

individual mortgage files. These reviews include on-site examination of 

processes for ensuring the accuracy of the flood zone determinations 

that are obtained. Generally, the largest sellers and servicers are 

evaluated every year; others are reviewed every 2 to 3 years.



In addition, Fannie Mae is looking at various options to improve its 

methodology for performing its flood insurance reviews. One such option 

is the use of Geographic Information Systems data and flood maps to 

target loans in its portfolio for flood reviews. This effort is 

currently in the testing stages.



Freddie Mac:



* Quality control program: The data file for each mortgage purchased by 

Freddie Mac must contain a special characteristic code describing the 

mortgage’s status regarding flood insurance, as follows: in a flood 

zone with insurance coverage in place; in a flood zone with no flood 

insurance coverage; not in a flood zone with flood insurance coverage; 

or not in a flood zone and no flood insurance coverage. As part of 

Freddie Mac’s quality control program, a statistical sample of newly 

delivered mortgages is reviewed for the correct special characteristic 

codes regarding flood insurance; proper documentation of the flood zone 

determination; and, if applicable, the flood insurance policy.



* Flood audit program: Freddie Mac auditors provide a list of addresses 

for all of a servicer’s mortgages to a flood zone determination 

company. The flood zone determination company reviews the addresses in 

the portfolio and arrives at a list of 25 properties located entirely 

within special flood hazard areas. The list is then sent to several 

other participating flood zone determination companies to verify that 

the identified properties are within SFHAs. Each company performs 

independent flood zone determinations for the listed properties; 

Freddie Mac eliminates any properties for which the “in” determination 

is not unanimous. At the sellers and servicers’ facilities during the 

audit, Freddie Mac audits the mortgage files for the selected 

properties to verify that all of the flood insurance requirements are 

met. This includes ensuring that flood insurance is in effect and that 

the coverage meets Freddie Mac’s requirements.



* Underwriting reviews: Freddie Mac reviews sellers and servicers’ 

management controls for identifying properties in SFHAs, ensuring that 

flood insurance is maintained, and ensuring that flood insurance 

coverage is at least equivalent to that provided under the NFIP.



* Servicing review: Freddie Mac auditors review the management controls 

that sellers and servicers have in place to (1) become aware of changes 

in SFHAs, (2) ensure that the borrower obtains flood insurance coverage 

if the sellers and servicers become aware that existing coverage does 

not adequately protect the mortgaged premises, (3) ensure that the 

borrower obtains the required insurance, and (4) ensure that the 

sellers and servicers obtain the required coverage if the borrower does 

not obtain it.



Appendix VII [End of section]



State: California; County: Contra Costa; Total number of census tracts 

in county: 168; Number of: 1; Policies issued in flood-prone census 

tracts: 48; Mortgages originated in flood-prone census tracts: 68; 

Percentage of policies issued to mortgages originated: 71.



State: California; County: Kern; Total number of census tracts in 

county: 109; Number of: 2; Policies issued in flood-prone census 

tracts: 445; Mortgages originated in flood-prone census tracts: 183; 

Percentage of policies issued to mortgages originated: 243.



State: California; County: Los Angeles; Total number of census tracts 

in county: 1,652; Number of: 39; Policies issued in flood-prone census 

tracts: 9,943; Mortgages originated in flood-prone census tracts: 

2,706; Percentage of policies issued to mortgages originated: 367.



State: California; County: Merced; Total number of census tracts in 

county: 53; Number of: 1; Policies issued in flood-prone census tracts: 

136; Mortgages originated in flood-prone census tracts: 51; Percentage 

of policies issued to mortgages originated: 267.



State: California; County: Orange; Total number of census tracts in 

county: 484; Number of: 20; Policies issued in flood-prone census 

tracts: 2,777; Mortgages originated in flood-prone census tracts: 

1,216; Percentage of policies issued to mortgages originated: 228.



State: California; County: Sacramento; Total number of census tracts in 

county: 207; Number of: 39; Policies issued in flood-prone census 

tracts: 4,986; Mortgages originated in flood-prone census tracts: 

2,713; Percentage of policies issued to mortgages originated: 184.



State: Florida; County: Broward; Total number of census tracts in 

county: 164; Number of: 55; Policies issued in flood-prone census 

tracts: 16,978; Mortgages originated in flood-prone census tracts: 

11,217; Percentage of policies issued to mortgages originated: 151.



State: Florida; County: Charlotte; Total number of census tracts in 

county: 22; Number of: 6; Policies issued in flood-prone census tracts: 

1,825; Mortgages originated in flood-prone census tracts: 845; 

Percentage of policies issued to mortgages originated: 216.



State: Florida; County: Collier; Total number of census tracts in 

county: 31; Number of: 8; Policies issued in flood-prone census tracts: 

1,657; Mortgages originated in flood-prone census tracts: 889; 

Percentage of policies issued to mortgages originated: 186.



State: Florida; County: Dade; Total number of census tracts in county: 

267; Number of: 48; Policies issued in flood-prone census tracts: 

12,301; Mortgages originated in flood-prone census tracts: 9,395; 

Percentage of policies issued to mortgages originated: 131.



State: Florida; County: Escambia; Total number of census tracts in 

county: 54; Number of: 2; Policies issued in flood-prone census tracts: 

280; Mortgages originated in flood-prone census tracts: 144; Percentage 

of policies issued to mortgages originated: 194.



State: Florida; County: Glades; Total number of census tracts in 

county: 2; Number of: 1; Policies issued in flood-prone census tracts: 

47; Mortgages originated in flood-prone census tracts: 24; Percentage 

of policies issued to mortgages originated: 196.



State: Florida; County: Hillsborough; Total number of census tracts in 

county: 168; Number of: 7; Policies issued in flood-prone census 

tracts: 1,178; Mortgages originated in flood-prone census tracts: 716; 

Percentage of policies issued to mortgages originated: 165.



State: Florida; County: Lee; Total number of census tracts in county: 

93; Number of: 24; Policies issued in flood-prone census tracts: 5,297; 

Mortgages originated in flood-prone census tracts: 2,669; Percentage of 

policies issued to mortgages originated: 198.



State: Florida; County: Manatee; Total number of census tracts in 

county: 45; Number of: 4; Policies issued in flood-prone census tracts: 

878; Mortgages originated in flood-prone census tracts: 213; Percentage 

of policies issued to mortgages originated: 412.



State: Florida; County: Monroe; Total number of census tracts in 

county: 29; Number of: 8; Policies issued in flood-prone census tracts: 

1,518; Mortgages originated in flood-prone census tracts: 349; 

Percentage of policies issued to mortgages originated: 435.



State: Florida; County: Palm Beach; Total number of census tracts in 

county: 211; Number of: 3; Policies issued in flood-prone census 

tracts: 1,057; Mortgages originated in flood-prone census tracts: 738; 

Percentage of policies issued to mortgages originated: 143.



State: Florida; County: Pasco; Total number of census tracts in county: 

38; Number of: 2; Policies issued in flood-prone census tracts: 778; 

Mortgages originated in flood-prone census tracts: 325; Percentage of 

policies issued to mortgages originated: 239.



State: Florida; County: Pinellas; Total number of census tracts in 

county: 191; Number of: 23; Policies issued in flood-prone census 

tracts: 3,709; Mortgages originated in flood-prone census tracts: 

2,653; Percentage of policies issued to mortgages originated: 140.



State: Florida; County: Sarasota; Total number of census tracts in 

county: 42; Number of: 5; Policies issued in flood-prone census tracts: 

896; Mortgages originated in flood-prone census tracts: 439; Percentage 

of policies issued to mortgages originated: 204.



State: Florida; County: St. Johns; Total number of census tracts in 

county: 14; Number of: 2; Policies issued in flood-prone census tracts: 

177; Mortgages originated in flood-prone census tracts: 91; Percentage 

of policies issued to mortgages originated: 195.



State: Florida; County: St. Lucie; Total number of census tracts in 

county: 39; Number of: 2; Policies issued in flood-prone census tracts: 

121; Mortgages originated in flood-prone census tracts: 100; Percentage 

of policies issued to mortgages originated: 121.



State: Georgia; County: Chatham; Total number of census tracts in 

county: 71; Number of: 1; Policies issued in flood-prone census tracts: 

206; Mortgages originated in flood-prone census tracts: 54; Percentage 

of policies issued to mortgages originated: 381.



State: Hawaii; County: Honolulu; Total number of census tracts in 

county: 200; Number of: 5; Policies issued in flood-prone census 

tracts: 88; Mortgages originated in flood-prone census tracts: 357; 

Percentage of policies issued to mortgages originated: 25.



State: Iowa; County: Pottawattamie; Total number of census tracts in 

county: 26; Number of: 1; Policies issued in flood-prone census tracts: 

102; Mortgages originated in flood-prone census tracts: 30; Percentage 

of policies issued to mortgages originated: 340.



State: Louisiana; County: Assumption; Total number of census tracts in 

county: 6; Number of: 1; Policies issued in flood-prone census tracts: 

100; Mortgages originated in flood-prone census tracts: 30; Percentage 

of policies issued to mortgages originated: 333.



State: Louisiana; County: Jefferson; Total number of census tracts in 

county: 116; Number of: 38; Policies issued in flood-prone census 

tracts: 5,491; Mortgages originated in flood-prone census tracts: 

2,377; Percentage of policies issued to mortgages originated: 231.



State: Louisiana; County: Lafourche; Total number of census tracts in 

county: 20; Number of: 5; Policies issued in flood-prone census tracts: 

632; Mortgages originated in flood-prone census tracts: 169; Percentage 

of policies issued to mortgages originated: 374.



State: Louisiana; County: Orleans; Total number of census tracts in 

county: 184; Number of: 30; Policies issued in flood-prone census 

tracts: 2,944; Mortgages originated in flood-prone census tracts: 

1,131; Percentage of policies issued to mortgages originated: 260.



State: Louisiana; County: St. Bernard; Total number of census tracts in 

county: 17; Number of: 1; Policies issued in flood-prone census tracts: 

100; Mortgages originated in flood-prone census tracts: 40; Percentage 

of policies issued to mortgages originated: 250.



State: Louisiana; County: St. Charles; Total number of census tracts in 

county: 15; Number of: 1; Policies issued in flood-prone census tracts: 

348; Mortgages originated in flood-prone census tracts: 203; Percentage 

of policies issued to mortgages originated: 171.



State: Louisiana; County: St. Tammany; Total number of census tracts in 

county: 33; Number of: 4; Policies issued in flood-prone census tracts: 

683; Mortgages originated in flood-prone census tracts: 282; Percentage 

of policies issued to mortgages originated: 242.



State: Louisiana; County: Terrebonne; Total number of census tracts in 

county: 18; Number of: 2; Policies issued in flood-prone census tracts: 

236; Mortgages originated in flood-prone census tracts: 73; Percentage 

of policies issued to mortgages originated: 323.



State: Louisiana; County: Vermilion; Total number of census tracts in 

county: 13; Number of: 1; Policies issued in flood-prone census tracts: 

148; Mortgages originated in flood-prone census tracts: 26; Percentage 

of policies issued to mortgages originated: 569.



State: Maryland; County: Worcester; Total number of census tracts in 

county: 23; Number of: 5; Policies issued in flood-prone census tracts: 

657; Mortgages originated in flood-prone census tracts: 218; Percentage 

of policies issued to mortgages originated: 301.



State: Mississippi; County: Harrison; Total number of census tracts in 

county: 40; Number of: 1; Policies issued in flood-prone census tracts: 

191; Mortgages originated in flood-prone census tracts: 62; Percentage 

of policies issued to mortgages originated: 308.



State: New Jersey; County: Atlantic; Total number of census tracts in 

county: 71; Number of: 7; Policies issued in flood-prone census tracts: 

1,200; Mortgages originated in flood-prone census tracts: 407; 

Percentage of policies issued to mortgages originated: 295.



State: New Jersey; County: Bergen; Total number of census tracts in 

county: 210; Number of: 1; Policies issued in flood-prone census 

tracts: 114; Mortgages originated in flood-prone census tracts: 56; 

Percentage of policies issued to mortgages originated: 204.



State: New Jersey; County: Cape May; Total number of census tracts in 

county: 23; Number of: 7; Policies issued in flood-prone census tracts: 

1,583; Mortgages originated in flood-prone census tracts: 593; 

Percentage of policies issued to mortgages originated: 267.



State: New Jersey; County: Hudson; Total number of census tracts in 

county: 161; Number of: 4; Policies issued in flood-prone census 

tracts: 81; Mortgages originated in flood-prone census tracts: 291; 

Percentage of policies issued to mortgages originated: 28.



State: New Jersey; County: Monmouth; Total number of census tracts in 

county: 147; Number of: 1; Policies issued in flood-prone census 

tracts: 49; Mortgages originated in flood-prone census tracts: 45; 

Percentage of policies issued to mortgages originated: 109.



State: New Jersey; County: Ocean; Total number of census tracts in 

county: 87; Number of: 9; Policies issued in flood-prone census tracts: 

1,175; Mortgages originated in flood-prone census tracts: 675; 

Percentage of policies issued to mortgages originated: 174.



State: New Mexico; County: Valencia; Total number of census tracts in 

county: 12; Number of: 1; Policies issued in flood-prone census tracts: 

90; Mortgages originated in flood-prone census tracts: 35; Percentage 

of policies issued to mortgages originated: 257.



State: New York; County: Kings; Total number of census tracts in 

county: 789; Number of: 1; Policies issued in flood-prone census 

tracts: 0; Mortgages originated in flood-prone census tracts: 21; 

Percentage of policies issued to mortgages originated: 0.



State: New York; County: Nassau; Total number of census tracts in 

county: 270; Number of: 3; Policies issued in flood-prone census 

tracts: 521; Mortgages originated in flood-prone census tracts: 217; 

Percentage of policies issued to mortgages originated: 240.



State: New York; County: New York; Total number of census tracts in 

county: 298; Number of: 1; Policies issued in flood-prone census 

tracts: 1; Mortgages originated in flood-prone census tracts: 98; 

Percentage of policies issued to mortgages originated: 1.



State: North Carolina; County: Beaufort; Total number of census tracts 

in county: 10; Number of: 1; Policies issued in flood-prone census 

tracts: 156; Mortgages originated in flood-prone census tracts: 36; 

Percentage of policies issued to mortgages originated: 433.



State: North Carolina; County: Dare; Total number of census tracts in 

county: 6; Number of: 1; Policies issued in flood-prone census tracts: 

15; Mortgages originated in flood-prone census tracts: 37; Percentage 

of policies issued to mortgages originated: 41.



State: North Carolina; County: New Hanover; Total number of census 

tracts in county: 31; Number of: 1; Policies issued in flood-prone 

census tracts: 148; Mortgages originated in flood-prone census tracts: 

34; Percentage of policies issued to mortgages originated: 435.



State: North Carolina; County: Pamlico; Total number of census tracts 

in county: 2; Number of: 1; Policies issued in flood-prone census 

tracts: 137; Mortgages originated in flood-prone census tracts: 35; 

Percentage of policies issued to mortgages originated: 391.



State: North Dakota; County: Grand Forks; Total number of census tracts 

in county: 19; Number of: 1; Policies issued in flood-prone census 

tracts: 76; Mortgages originated in flood-prone census tracts: 20; 

Percentage of policies issued to mortgages originated: 380.



State: South Carolina; County: Beaufort; Total number of census tracts 

in county: 22; Number of: 5; Policies issued in flood-prone census 

tracts: 710; Mortgages originated in flood-prone census tracts: 203; 

Percentage of policies issued to mortgages originated: 350.



State: South Carolina; County: Charleston; Total number of census 

tracts in county: 89; Number of: 5; Policies issued in flood-prone 

census tracts: 832; Mortgages originated in flood-prone census tracts: 

328; Percentage of policies issued to mortgages originated: 254.



State: South Carolina; County: Colleton; Total number of census tracts 

in county: 9; Number of: 1; Policies issued in flood-prone census 

tracts: 50; Mortgages originated in flood-prone census tracts: 24; 

Percentage of policies issued to mortgages originated: 208.



State: Texas; County: Brazoria; Total number of census tracts in 

county: 55; Number of: 1; Policies issued in flood-prone census tracts: 

139; Mortgages originated in flood-prone census tracts: 61; Percentage 

of policies issued to mortgages originated: 228.



State: Texas; County: Cameron; Total number of census tracts in county: 

64; Number of: 1; Policies issued in flood-prone census tracts: 198; 

Mortgages originated in flood-prone census tracts: 62; Percentage of 

policies issued to mortgages originated: 319.



State: Texas; County: El Paso; Total number of census tracts in county: 

95; Number of: 1; Policies issued in flood-prone census tracts: 88; 

Mortgages originated in flood-prone census tracts: 26; Percentage of 

policies issued to mortgages originated: 338.



State: Texas; County: Galveston; Total number of census tracts in 

county: 67; Number of: 9; Policies issued in flood-prone census tracts: 

1,169; Mortgages originated in flood-prone census tracts: 485; 

Percentage of policies issued to mortgages originated: 241.



State: Texas; County: Harris; Total number of census tracts in county: 

582; Number of: 2; Policies issued in flood-prone census tracts: 135; 

Mortgages originated in flood-prone census tracts: 74; Percentage of 

policies issued to mortgages originated: 182.



State: Texas; County: Taylor; Total number of census tracts in county: 

36; Number of: 4; Policies issued in flood-prone census tracts: 289; 

Mortgages originated in flood-prone census tracts: 141; Percentage of 

policies issued to mortgages originated: 205.



State: Virginia; County: Accomack; Total number of census tracts in 

county: 9; Number of: 1; Policies issued in flood-prone census tracts: 

130; Mortgages originated in flood-prone census tracts: 26; Percentage 

of policies issued to mortgages originated: 500.



State: Virginia; County: Norfolk City; Total number of census tracts in 

county: 90; Number of: 1; Policies issued in flood-prone census tracts: 

66; Mortgages originated in flood-prone census tracts: 41; Percentage 

of policies issued to mortgages originated: 161.



State: Virginia; County: Poquoson City; Total number of census tracts 

in county: 3; Number of: 1; Policies issued in flood-prone census 

tracts: 78; Mortgages originated in flood-prone census tracts: 40; 

Percentage of policies issued to mortgages originated: 195.



State: Washington; County: Skagit; Total number of census tracts in 

county: 12; Number of: 1; Policies issued in flood-prone census tracts: 

112; Mortgages originated in flood-prone census tracts: 58; Percentage 

of policies issued to mortgages originated: 193.



State: Total; County: [Empty]; Total number of census tracts in county: 

8,134; Number of: 471; Policies issued in flood-prone census tracts: 

88,300; Mortgages originated in flood-prone census tracts: 46,965; 

Percentage of policies issued to mortgages originated: 188.



[End of table]



Source: GAO analysis of FEMA, HMDA, and TransAmerica data.



Appendix IX [End of section]



Appendix XI [End of section]



Appendix XIII [End of section]



Appendix XV [End of section]



Appendix XVII [End of section]



Appendix XIX [End of section]



GAO Contacts:



JayEtta Z. Hecker (202) 512-2834 John R. Schulze (202) 512-2834:



Staff Acknowledgments:



In addition to those named above, Martha Chow, Lawrence D. Cluff, Colin 

J. Fallon, Kerry D. Hawranek, DuEwa A. Kamara, Signora J. May, John T. 

McGrail, Lisa M. Moore, Patricia D. Moore, Bob Procaccini, and John J. 

Strauss made key contributions to this report.



(394005):



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FOOTNOTES



[1] A federally regulated lending institution is any bank, savings and 

loan association, credit union, farm credit bank, federal land bank 

association, production credit association, or similar institution 

supervised by a federal entity for lending regulation.



[2] A GSE is a privately owned, federally chartered corporation that 

serves a public purpose.



[3] U.S. General Accounting Office, Flood Insurance: Information on the 

Mandatory Purchase Requirement, GAO/RCED-90-141FS (Washington, D.C.: 

Aug. 22, 1990).



[4] U.S. General Accounting Office, Flood Insurance: Emerging 

Opportunity to Better Measure Certain Results of the National Flood 

Insurance Program, GAO-01-736T (Washington, D.C.: May 15, 2001).



[5] P.L. 90-448.



[6] Fannie Mae and Freddie Mac are GSEs chartered by the Congress to 

support residential housing by providing a secondary market for 

mortgages.



[7] There are some exceptions to these requirements. A property that 

meets all of these criteria may be exempted if it can be proven that 

the property’s elevation actually exceeds the flood plain even though 

it is not accurately recorded on the flood map. In such cases, FEMA 

issues letters of map amendment or letters of map revision. Conversely, 

homeowners without mortgages or whose mortgages are not made by 

regulated lenders may be required to purchase and maintain flood 

insurance as a condition of accepting federal disaster relief.



[8] A servicer is the entity responsible for (1) receiving any 

scheduled, periodic payments from a borrower under the terms of a loan, 

including amounts for taxes, insurance premiums, and other charges with 

respect to the property securing the loan; and (2) making payments of 

principal and interest and any other payments from the amounts received 

from the borrower as may be required under the terms of the loan. Some 

lenders do their own servicing, while others sell the servicing rights 

to loans in their portfolio.



[9] FEMA Office of Inspector General, Opportunities to Enhance 

Compliance with Homeowner Flood Insurance Purchase Requirements, I-02-

00 (Washington, D.C.: Aug. 2000). FEMA Region I, Vermont Lender 

Compliance with the Flood Disaster Protection Act of 1973 and the Title 

V of the Riegle Community Development and Regulatory Improvement Act of 

1994, DR-1228-VT (Boston, Mass.: Apr. 1999 Draft).



[10] [0] The sampled properties were located within the SFHA.



[11] [1] A census tract is a small, relatively permanent statistical 

subdivision of a county.



[12] [2] Under the Home Mortgage Disclosure Act, mortgage data must be 

reported by nondepository lenders that have assets above $10 million or 

depository institutions that have assets above $29 million, maintain a 

home or branch office in a metropolitan statistical area (MSA), or make 

loans in a MSA. Institutions that make 100 or more loans (including 

refinancings) during the calendar year are also required to report.



[13] [3] The regulators we chose account for most of the pertinent 

mortgage market. We did not include the Farm Credit Administration, 

National Credit Union Administration, Federal Home Administration, 

Veterans Affairs Administration, or the Rural Housing Service. These 

agencies were excluded because they either originate a small percentage 

of all outstanding loans or because their loan programs fall under the 

jurisdiction of one of the regulatory agencies. The Government National 

Mortgage Association was excluded because it does not have direct 

responsibility for compliance with the mandatory purchase of flood 

insurance requirements.



[14] [4] Of the policies written, 26,544 (5 percent) could not be 

identified with a census tract and were not used in our analysis.



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20548:[15] [5] We cannot say with certainty that any particular loan we 

identified definitely required flood insurance. We did not have 

property addresses for insurance policies or mortgages.