Levees Systems and Flood Insurance 
Information for Mortgage Lenders 
FACT SHEET 
Levees Systems and Flood Insurance 
Information for Mortgage Lenders 
FACT SHEET 
LEVEE SYSTEMS: RISK 
REDUCTION, NOT RISK 
ELIMINATION 

The United States has thousands of 
miles of levees—usually earthen 
embankments—designed and 
constructed in accordance with sound 
engineering practices to provide 
protection from temporary flooding 
along rivers, lakes, and coastlines. 
Many levee systems were first put in 
place to protect agricultural areas 
from frequent flooding. They date 
back as much as 150 years. Others 
were designed to protect urban areas, 
and were typically built to higher 
standards. However, no levee system 
provides full protection from all flood 
events. . 

All levee systems are designed and 
constructed to provide a specific level 
of flood protection and can be 
overtopped during larger flood events. 
This includes levee systems designed 
to provide protection from the 
“1-percent-annual-chance flood.” 
Levee systems require regular 
maintenance to retain their level of 
protection. Levee systems can and do 
decay over time, and maintenance can 
become a serious challenge. When 
levee systems do fail, or they are 
overtopped, the results are often 
catastrophic; the flood damage may 
be more significant than if the levee 
system had not been built. 

For these reasons, mortgage lenders 
should take into account the unique 
flood risks associated with levee 
systems when making or servicing 
loans in levee-impacted areas. 

FLOOD MAPS IDENTIFY RISKS 

Flood risks are identified on flood 
hazard maps, also known as Flood 
Insurance Rate Maps (FIRMs). 
FIRMs display high-risk areas as 
Special Flood Hazard Areas (SFHAs). 
Flood insurance is required in high-
risk flood areas as a condition of any 
mortgage that is federally backed, 
regulated, or insured. FIRMs also 
show low- to moderate-risk areas, 
where flood insurance is optional, but 
encouraged along with floodproofing 
and other mitigation measures. Many 
property owners in these areas will 
qualify for lower-cost Preferred Risk 
Policies (PRPs). 

LEVEE SYSTEMS AND 
MODERNIZED FLOOD MAPS 

FEMA is updating FIRMs nationwide 
to reflect current flood risk data. As 
part of the process, FEMA is 
collecting data and documentation 
from community officials and levee 
system owners to determine whether 
levee systems meet NFIP 
requirements for providing 1-percentannual-
chance flood protection. 

Eligible levee system owners are 
allowed up to 24 months to submit 
required data and documentation. 
During that time, the levee system is 
shown on the map as provisionally 
accredited and the impacted area is 
shown on the modernized, digital 
map—the DFIRM—as having a 
moderate flood risk. If a levee system 
cannot be shown as meeting NFIP 
criteria within the time allowed, the 
levee-impacted area will be shown as 
an SFHA on the DFIRM and flood 
insurance requirements will apply. 

LEVEE SYSTEMS AND FLOOD 
INSURANCE—THE LENDER’S 
ROLE 
Federal law requires that 
federally regulated or insured 
lenders meet mandatory flood 
insurance purchase 
requirements applicable to 
structures securing loans 
located in Special Flood Hazard 
Areas (SFHAs). 
Whenever you make, increase, 
extend, or renew a mortgage, 
home equity, home 
improvement, non-residential or 
farm credit loan in an SFHA, you 
must make sure the property is 
covered with flood insurance to 
close that loan. 
Areas impacted by levee 
systems that longer meet NFIP 
regulations are designated as 
high-risk SFHAs, and flood 
insurance is required in these 
areas once the map becomes 
effective. 
Civil monetary penalties may be 
assessed by regulatory 
authorities against non-
compliant lenders. 
DECEMBER 2008 PAGE 1 



PROTECTING EVERY PROPERTY—THE MORTGAGE LENDER’S ROLE 

When a DFIRM shows SFHAs, you must notify affected clients about insurance requirements. When lending in 
communities with levee systems, you should pay special attention to changing risk levels and related insurance 
requirements. Access to current information concerning levee systems will speed loan closings and protect loan 
collateral. Your customers’ flood risk doesn’t end at a line on a flood map. Your lending institution may choose to 
require flood insurance on all loans, even those for buildings located outside the SFHAs. 

If your customers live in a levee-impacted area, you should recommend the following steps to help them reduce the 
impact of flood events: 

. 
Understand the risk. Local officials can provide more information about the flood risk for the property. 
. 
Plan for evacuation. Plan and practice a flood evacuation route, and ask someone out of state to be a “family 
contact” in an emergency. 
. 
Consider purchasing flood insurance. Flood insurance can protect a home or business financially, and it is 
available regardless of the accreditation status of a levee system. 
The chart below shows how FEMA designates risks on FIRMs and DFIRMs and the requirements and options for flood 
insurance in levee-impacted areas. 

IF THE LEVEE 
SYSTEM… 
THE NFIP FLOOD MAP SHOWS 
THIS FLOOD RISK AS… 
AND THESE FLOOD INSURANCE 
REQUIREMENTS AND OPTIONS APPLY 
Is not currently shown as 
providing protection from the 
1-percent annual- chance 
flood. 
(Not Accredited) 
High flood risk, with levee-impacted areas 
shown as being in an SFHA (labeled as 
Zones A, AE, AH, AO) on the map. 
Flood insurance is required in high-risk areas 
as a condition of any mortgage that is federally 
backed, regulated, or insured. Your customers 
should be aware that Insurance rates may rise to 
reflect higher flood risk in these areas. 
Provides protection from the 
1-percent-annual-chance 
flood. 
(Accredited) 
Moderate flood risk, with levee-impacted 
areas shown as being in Zones B, C, X, or 
X (shaded) on the map. 
The mandatory flood insurance purchase 
requirements of the NFIP do not apply in 
Zones B, C, X, or X (shaded), but flood insurance 
is strongly recommended. Lower-cost Preferred 
Risk Policies (PRPs) are available for most 
buildings in Zones B, C, X, or X (shaded). 
No longer meets the 
minimum standards to be 
shown as providing protection 
from the 1-percent-annual- 
chance flood. 
(De-Accredited) 
High flood risk, with levee-impacted areas 
shown as being in an SFHA (labeled as 
Zones A, AE, AH, AO) on the map. 
Flood insurance is required in high-risk areas 
as a condition of any mortgage that is federally 
backed, regulated, or insured. Grandfathering 
can save your customers money. Buildings 
covered by flood insurance before the effective 
date of new maps can be grandfathered in at the 
current flood insurance risk zone designation, as 
long as there is no lapse in coverage. Note: This 
coverage can be transferred. 
Is temporarily shown as 
providing protection from the 
1-percent-annual-chance flood 
while additional documentation 
is being gathered. 
(Provisionally Accredited) 
Moderate flood risk, with levee-impacted 
areas being shown as being behind a 
Provisionally Accredited Levee, or PAL 
(shown as a Zone X (shaded) on the map 
pending accreditation of the levee system). 
The mandatory flood insurance purchase 
requirements of the NFIP do not apply in 
Zones B, C, X, or X (shaded), but flood insurance 
is strongly recommended. Lower-cost PRPs 
are available for most buildings in Zones B, C, X, 
or X (shaded). 
For more detailed information about levee systems and the flood insurance risk zones shown on FIRMs and DFIRMs, 
please visit the FEMA Web site at www.fema.gov/plan/prevent/fhm. The gateway to the FEMA-provided levee system 
information, which is organized by stakeholder group to assist community officials, property owners, lending industry 
professionals, and other stakeholders, is www.fema.gov/plan/prevent/fhm/lv_intro.shtm 

 DECEMBER 2008 PAGE 2