Hundreds of Oregon homeowners every year are wrongly told they need costly flood insurance, caught in a system that the state’s National Flood Insurance Program coordinator says lacks oversight and should be fixed.
And the Federal Emergency Management Agency, which oversees floodplain mapping, isn’t doing much to quell a rising tide of disgruntled homeowners, including those in Oregon.
It works like this: Lenders, under financial pressure from a debt-ridden FEMA, are contacting homeowners who need flood insurance but don’t have it. But in the process of trying to identify those homes, lenders are also lumping in properties near the flood zones with those actually in it.
FEMA says a person’s home — not simply their surrounding property — must be in a flood zone to require the insurance. The problem is, with two-dimensional maps, it’s impossible to precisely determine what is ultimately a vertical measurement: Whether water would likely reach a person’s home.
And many lenders aren’t bringing in surveyors to do the technical measurements needed to make that conclusion. Instead, banks hire private flood-mapping companies to remotely determine matters of feet that can translate into thousands of dollars per year in flood insurance.
Often, they’re wrong.
It’s up to homeowners to challenge whether their homes are in a flood zone. That means hiring a surveyor, which costs upwards of $500.
In Oregon, the number of homeowners submitting map amendment requests to
FEMA has risen precipitously. In 2008, Oregon homeowners challenged 282 flood-zone designations. In the years since, challenges have averaged 600 annually as lenders have upped their enforcement efforts and more mapping technology has become available.
The vast majority of those amendments are approved, said Ryan Ike, FEMA’s Pacific Northwest spokesperson.
Last July, Congress passed a five-year reauthorization and reform plan intended to keep NFIP afloat. Among the changes is a penalty increase for lenders that don’t properly insure homes in special flood hazard areas, raising fines from $350 to $2,000 per violation and removing an annual penalties cap.
To avoid those penalties, lenders are likely to include properties on the boundary of the floodplain, said Christine Shirley, who coordinates the national flood insurance program for Oregon.
“(Lenders) have a perverse incentive to over-estimate how many people are in the flood zone,” she said.
‘Too close to tell’
In Cornelius, a small city in western Washington County, some homeowners have been caught in the process. Homes along South Heather Street, adjacent to the Tualatin River, are close to a flood hazard area. Until last summer, some of those homeowners did not require flood insurance.
Tim Franz, associate planner for the city, said though some parts of Cornelius flood about twice a year, no homes have ever been inundated. During the city’s worst flood in 1996, he said, water only came up to the street curbs.
The FEMA maps for Cornelius have not been updated since 1982. Yet starting last May, homeowners got letters from their lenders saying FEMA had designated their homes at high risk of flooding.
Carol Justice, 49, bought her residence in 2005, assured by her real estate agent that it was not in a flood hazard area. The pale blue duplex sits almost at the top of a hill with Free Orchards Park, a protected wetland, extending from her backyard into the flood zone. The wetlands are easy to identify as in a flood zone, but her home sits on a higher elevation.
When the letter came May 16 from Chase, her lender, Justice was confused. But the wording was clear: “We want to let you know that the area in which your property is located has been identified by the Federal Emergency Management Agency as a Special Flood Hazard Area (SFHA). Your secured property is now located in a high risk flood zone A3,” the letter read.
Furthermore, the letter said, if she didn’t buy her own flood insurance within 45 days, Chase would do so for her, at a hefty $12,644 per year. According to Washington County tax records, Justice’s home has an assessed value of $127,580.
“This is not right,” Justice said. “Until somebody answers the questions, I shouldn’t have to do anything. But then Chase pinned me in a corner and I had to fork out the cash.”
Chase officials said according to the FEMA-provided maps, Justice’s home is in a flood zone. But Ike, the FEMA spokesman, said Justice’s home can’t easily be declared in or out without a surveyor opinion.
“It’s too close to tell,” Ike said.
Chase Vice President Amy Bonitatibus said FEMA ultimately makes the call on which homes are in the flood zone.
“A determination on whether a customer requires flood insurance is solely based on FEMA maps,” Bonitatibus said.
FEMA not only defers to lenders, but also allows them to use language that convinces homeowners it is the national agency rather than a private company that has made the determination.
Deborah Farmer, a FEMA insurance specialist for the Pacific Northwest region, said the language is “standard.”
Shirley, the state coordinator, said that though it is standard, she is not sure why FEMA doesn’t find the language more problematic. FEMA offices should be flooded with complaints, she said.
“It’s extremely misleading and is sent on a letterhead that makes it look like it’s from FEMA,” Shirley said.
Justice refuses to pay a surveyor to counter that letter because she bristles at the principle of paying to fight what she says is already an unfair process.
“I really feel like I am in this Catch-22 every corner that I turn,” she said.
Albert Hertel of Caswell/Hertel Surveyors, Inc. in Beaverton surveyed Justice’s neighbor’s property late last year.
Hertel said all homes along that street are at a low risk of flooding. And yet, because lenders only look at the lowest elevation of the property to determine whether a home is in a flood zone, the owners are “guilty until proven innocent,” he said.
Former longtime state Rep. Jean Cowan (D-Newport) took a particular interest in the issue of lender-placed flood insurance while in office.
She fought and eventually defeated a misdesignation on her home, in the process illustrating how lenders that look at properties rather than homes can skew a flood-zone designation.
There is a 30-foot drop from Cowan’s home to the lowest level on her property.
Three years ago, she received a letter from her lender saying her home had been designated in a flood zone. She paid “several hundred dollars” to bring in a surveyor, who determined she was far above the base elevation and that the company had likely made its finding based on her hillside property rather than her actual home. The lender-placed insurance would have cost her $2,250 a year, but Cowan’s map amendment was approved.
In conversations with Oregon’s Department of Land Conservation and Development, Cowan said she talked about how lenders need to use better technology to locate dwellings on maps. She also said the federal government needs to take a more active role in overseeing the process.
“One would really have to be aware and work at it to fight a designation,” Cowan said. “We should be working to help and give clarity.”
For now, Justice is continuing her fight. She has submitted a complaint to the state’s Department of Justice and has gotten help from Rep. Ben Unger (D-Hillsboro).
Chase recently removed a force-placed flood insurance policy from one of Justice’s two loans. Still, she said she can’t afford to pay for much longer.
“The economy is kicking my butt right now,” she said. “There have been very few pay raises and everything is costing so much more money. I would fight as hard as I could for my home, but there is a point where it’s done; you’re broken.”
— Andrea Castillo
— Katherine Driessen