No risk of flood, but forced to insure

Jeffrey Meitrodt in the Star-Tribune (Minnesota): Thousands of homeowners in Minnesota and across the country are being pressured to buy flood insurance by their mortgage lenders, despite evidence showing that many of these homes are well outside danger zones. Though the federal government's new flood maps are more accurate than ever, state and local officials say lenders and their agents are making obvious mistakes in their interpretation of flood risk.

Chisago County officials said they have intervened this year on behalf of 20 property owners who were wrongly classified as living in high-risk zones where flood insurance would be mandatory. Officials in Stearns and Washington counties also have taken steps to correct the record for dozens of homeowners who face minimal, if any, risk of flooding. "We're seeing too many problems," said Ceil Strauss, Minnesota's floodplain coordinator.

In many cases, lenders are giving homeowners just 45 days to buy flood insurance or threatening to obtain it for them, often at exorbitant prices. Some homeowners have been told their premiums could run as high as $6,400 a year.

Authorities expect the problem to get worse. Over the next two years, the Federal Emergency Management Agency will introduce new flood maps in more than two dozen counties in Minnesota, including Hennepin, the state's most populous. The maps will trigger more flood-risk reviews by mortgage lenders.

Often, lenders receive commissions for the new flood policies they impose on borrowers. Fees can amount to as much as 20 percent of the annual premium. In New York, officials are exploring whether to ban lenders from charging commissions on the forced placement of property insurance, calling such payments a "perverse incentive."....

Norman County, MN, March 29, 2009 --Flooded farms and rural communities in Norman County adjacent to the Red River of the North. Andrea Booher/FEMA