What Does it Mean to Not Participate in the NFIP?
Communities with SFHAs that choose not to participate -- or that withdraw or have been suspended -- probably do not regulate flood hazards to the NFIP minimum requirement. They may cause undue difficulties for their citizens, especially in the aftermath of a damaging flood event. The following apply to nonparticipating communities:
- Federal flood insurance is not available.
- Federal agencies shall not make grants or loans for buildings in identified flood hazard areas, including agencies such as Federal Housing Administration (FHA), Housing and Urban Development (HUD), Environmental Protection Agency (EPA), Small Business Administration (SBA) and Health and Human Services. This rule applies to federal grants and loans for any reconstruction, repair, construction, rehabilitation or additions to structures in SFHAs.
- Federal disaster assistance will not be provided in identified flood hazard areas for permanent restorative construction and grants. This means that public buildings damaged by flood are not eligible for federal disaster assistance.
- Federal mortgages shall not be available for structures in identified flood hazard areas, including loans or grants guaranteed by FHA, Veterans' Administration, SBA and federal instrumentalities such as the Federal Deposit Insurance Corporation and the National Credit Union Administration.
- The National Flood Insurance Reform Act of 1994 places restrictions on conventional loans, and lenders must notify the buyer or lessee if a property is in a flood hazard area.
- The Flood Insurance Rate Map and appropriate actuarial rates go into effect regardless of whether the community participates. Structures in SFHAs will be actuarially rated if the community later decides to join the NFIP. This could lead to extremely expensive insurance.
- The local governing body may be held liable for not participating in the NFIP because the action denies citizens the opportunity to purchase flood insurance and does not take positive steps to reduce the exposure of life and property in the face of authoritative scientific and technical data.
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