Flooding this year in northeast, northwest and now south Louisiana has left a trail of broken homes, but not spirits. What incredible resilience do the people of this state have. As people and communities recover, a broad policy issue needs to be discussed and brought to the attention of our policy makers. The National Flood Insurance Program was established in 1968 to reduce the impact of flooding on individuals and communities by providing affordable insurance.
When a person goes to a bank for a home loan a key part of the loan is to asses if the property is in a flood hazard area as determined by the NFIP. The bank uses the flood maps that are provided by the NFIP. These maps are the holy grail of lending, as they determine if the customer must purchase flood insurance. If the property is in a flood hazard area it is required that flood insurance be purchased as a condition of the loan.
If the property is not in the flood hazard area then usually the borrower does not purchase flood insurance as it is not required. The flaw in this process is the reliability of the flood maps. I ask you, do you have confidence in the flood maps that determine if your property is safe from flooding?
A borrower believes that when they are told the property is not in a flood hazard area that their property is safe from flooding. You can argue that this is not a reasonable conclusion, but the reality is the federal government is responsible for the mapping and the mapping is the driver of the purchase of the insurance.
The purpose of the flood insurance program is to protect people from catastrophic loss, and the flooding in Louisiana has demonstrated that the program has failed to do that. People who believed they were safe because the flood maps showed them to be outside the flood hazard area are now trying to figure out how they will rebuild.
Whole subdivisions and communities that are not in the flood hazard area were flooded. This is not right and we need to do two things: First, if you don’t have flood insurance consider purchasing it. If you are outside the flood hazard area it is inexpensive and gives peace of mind. Second, we need to talk to our elected officials about the flawed mapping that does not accurately predict where flooding will occur. The NFIP needs to be reauthorized by the U.S. Congress in September of 2017 and now is the time to make the flawed mapping a priority.
Robert T. Taylor
Chief Executive Officer
Louisiana Bankers Association