Mortgage Portfolio Protection Program Agreement (Part V)

Federal Emergency Management Agency
Federal Insurance Administration

Purpose
To enable the company to assist the mortgage lending and
servicing industries .in bringing mortgage portfolios into
compliance with the flood insurance requirements of the
Flood Disaster Protection Act of 1973.
Effective Date
October 1,2006
Issued By
Federal Emergency Management Agency
FederaI Insurance Administration
500 C Street, S.W. Washington, D.C. 20472

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Federal Insurance Administration
Appendix A

Mortgage Portfolio Protection Program
Guidelines and Requirements
BACKGROUND

Insurance Program's Mortgage Portfolio
Protection Program.

The Mortgage Portfolio Protection Program
(MPPP) was introduced on January 1, 1991,
as an additional tool, provided by the
Federal Insurance Administration (FIA), to
assist the mortgage lending and servicing
industries, in response to their requests, in
bringing their mortgage portfolios into
compliance with the flood insurance
requirements of the Flood Disaster
Protection Act of 1973.

REQUIREMENTS FOR
PARTICIPATING IN THE _MPPP
1. General
a. All mortgagors notified, in
conjunction with this Program, of
their need to purchase flood
insurance must be encouraged to
obtain a Standard Flood Insurance
Policy (SFIP) from their local agent.

The MPPP is not intended to act as a
substitute for the need for mortgagees to
review all mortgage loan applications at the
time of loan origination and comply with
flood insurance requirements as appropriate.

b. When a mortgagee or a mortgage
servicing company discovers, at any
time following.loan origination. that
one or more of the loans in its
portfolio are determined to be
located in a Special Flood Hazard
Area (SFHA), and that there is no
evidence of flood insurance on such
pr~pe~rty(ies),
then the MPPP m2y be
used by such lenderlservicer to
obtain (force place) the required
flood insurance coverage. The MPPP
process can be accomplished with
limited underwriting information and
with special flat flood insurance
rates.

It is expected that the proper implementation
of the various requirements of this MPPP
will result in mortgagors, following their
notification of the need for flood insurance,
to either show evidence of such a policy or
coiiiact their local i n s x z ~ c asen:
e
or
appropriate Write Your Own (WYO)
company to purchase the necessary
coverage. It is also intended that flood
insurance policies be written under the
MPPP only as a last resort, 2nd only on
mortgages whose mortgagors have failed to
respond to the various notifications required
by t h s MPPP.

c. In the event of a loss, the policy u~ill
have to be refonned if the wrong rate
has been applied for the zone in
which the property is located. Also,
the amount of coverage may have to
be changed if the building occupancy
does not support that amount.

The following represents the criteria and
requirements that must be followed by all
parties engaged in the sale of flood
insurance under the National Flood

1

MPPP Guidelines and Requirements

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IvlPPP capability, of the
requirements of the MPPP. The
WYO company must obtain signed
evidence from each such lender or
servicer indicating their receipt of
this information, and keep a copy in
its files. An example of such
evidence of receipt follows as
Addendum 5.
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responsibility to notify the mortgagor
of all coverage limitations at the
inception of coverage and to impose
those limitations that are applicable
at the time of loss adjustment.

2. WYO Arrangement Article 111-Fees
With the implementation of the MPPP,
there is no change in the method of
WYO company allowance from that
which is provided in the Financial
Assistance1 Subsidy Arrangement for all
flood insurance written.

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b. Mortgagee to Mortgagol-In order
to p.rticipate in the MPPP, the
lender (or its authorized
representative, whch will typically
be the WYO company providing the
coverage through the MPPP) must
notify the borrower of the following,
at a minimum:

3. Use of WYO Company Fees for
LendersIServicers or Others

a. No portion of the allowance that a
WYO company retains under the
WYO Financial AssistancelSubsidy
Arrangement for the MPPP may be
used to pay, reimburse or othenvise
remunerate a lending institution,
mortgage servicing company, or
other similar type of company that
the WYO company may work with
to assist in its flood insurance
compliance efforts.

(1) The requirements of the Flood
Disaster Protection Act of 1973.
(2) The flood zone location of the
borrower's property,
(3) The requirement for flood
Insurance,

(4) The fact that the lender has no
evidence of the borrower's
having flood insurance,

b. The only exception to this is a
situation where the lenderlservicer
may be actually due a commission
on any flood insurance policies
written on any portion of the
institution's portfolio because it was
written through a licensed property
insurance agent on their staff or
through a licensed insurance agency
owned by the institution or servicing
company.
'

(5) The amount of coverage being
required and its cost under the
h/IPPP, and

(6) The options of the borrower for
obtaining conventionally
underwritten flood insurance
coverage and the potential cost
benefits of doing so.

4. Notification

A more detailed discussion of the
notification requirements is made a
part of this program document in
both Section 15 and as Addendums
1 and 2.

a. WYO CompanyMortgagee-Any
WYO company participating in the
MPPP must notify the lender or
2

MPPP Guidelines and Requirements

a. Type of Use-The MPPP will be
allowed only in conjunction with
mortgage portfolio reviews and the
servicing of those portfolios by
lenders and mortgage servicing
companies. The MPPP is not allowed
to be used in conjunction with any
form of loan origination.
b. Type of Property-The standard
NFIP rules apply, and all types of
property eligible for coverage under
the NFIP will be eligible for
coverage under the NIPPP.

6. Source of Offering
The force placement capability will be
offered by the WYO companies only and
not by the NFIP Servicing Agent.

Both building and contents coverage will
be available under the MPPP. The
coverage limits available under the
Regular Program will be $250,000 for
building coverage and $100,000 for
contents. If the WYO company wishes
to provide higher limits that are available
to other occupancy types such as other
residential or non-residential, it may do
so only if it can indicate that occupancy
-~ypea a applupl;ate.
If the mortgaged
property is in an Emergency Program
Community, then the coverage limits
available will be $35,000 for building
coverage and $10,000 for contents.
Again, if the higher limits are desired for
other types of property, then the building
occupancy type must be provided at the
inception of the policy or when that
information may become available, but it
must be prior to any loss.
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7. Dual Interest
10. Policy Form
The policy will be written covering the
interest of both the mortgagee and the
mortgagor. The name of the mortgagor
must be included on the Application
Fornl. It is not, however, iiecessary to
include the mortgagee as a named
insured because the Mortgage Clause
(Article VI1.Q of the Dwelling Fornl and
the General Property Form) affords
building coverage to any mortgagee
named as mortgagee on the Flood
Insurance Application. If contents
coverage for the mortgagee is desired,
the mortgagee should be included as a
named insured.

8. Term 3f Policy
NFIP policies written under the MPPP
will be for a term of 1 year (subject to
the renewal notification process).

The current SFIP Dwelling Form and
General Property Form will be used,
depending upon the type of structure
ksured. Ir, the zbsence s f buildirnrg
occupancy information, the Dwelling
Form should be used.
11. Waiting Period
The NFIP rules for the waiting period
and effective dates apply to the MPPP.
12. Premium Payment
The current rules applicable to the NFIP
will apply. The lender or se~lricer(or
payor) has the option to follow its usual
business practices regarding premium
payment, so long as the NFrP rules are
followed.

3
MPPP Guidelines and Requirements

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a. The MPPP will require less
underwriting data than is normally
required under the standard NFIP
rules and regulations. The MPPP
data requirements for rating,
processing, and reporting are, at a
minimum:

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is located (lender must
determine, in order to decide
whether the mandatory purchase
requirement applies),
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(6) Amount of coverage,
(7) Name and address of mortgagee,

(8) Mortgage loan number,

(1) Name and mailing address of
insured (mortgagor; also see
Dual Interest),

(9) Policy number.
b. No elevation certificates are required
as there is no elevation rating.

(2) Address of insured (mortgaged)
property,

c. For more detailed information
regarding reporting requirements, see
the WYO Transaction Record
Reporting and Processing (TRRP)
Plan.

(3) Community name, number, map
panel number and suffix; and
program type (Emergency or
Regular),
(4) Occupancy type (so statutory
coverage limits are not exceeded.
This data may be difficult to
obtain. Also see Coverage
Offered.),

14. Rates
See the MPPP rate table below.

MORTGAGE PORTFOLIO PROTECTION PROGRAM RATE AND
INCREASED COST OF COMPLIANCE (ICC) TABLE

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Zone
Emergency Program
Community

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MFPP Rates per
$100 of Building
coverage

lMPPP Rates per
$100 of Contents
Coverage

2.52 I1.26

2.65 11.26

NIA

2.52 I1.26

2.65 I1.26

75.00

3.92 I3.92

3.68 13.68

75.00

.67 1.40

.89 1.35

6.00

ICC Premium for
$30,000 Coverage

A Zones - All building &

occupancy types, except
A99, AR, AR Dual Zones
V Zones - All building &
occupancy types
A99 Zone, AR,
AR Dual Zones

NOTES: 1. ICC coverage does not apply to contents-only policies or to individually owned condominium units
insured under the Dwelling Form or General Property Form.
2. The ICC premium is not eligible for the deductible discount. First calculate the deductible discount,
then add in the ICC premium.
3. Add Federal Policy Fee and Probation Surcharge, if applicable, when computing the premium.
I . MPPP polices are not eligible for Community Rating System premium discouna.
4

MPPP Guidelines and Requirements

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Requirements

In addition to the routine information,
such asamounts of coverage,
deductibles, and premiums, that a WYO
company may place on the policy
declarations page issued to each insured
under the NFIP, the following messages
are required:
a. This policy is being provided for you
as it is reqtiired by Federal law s has
been mentioned in the previous
notices sent to you on this issue.
Since your mortgage company has
not received proof of flood insurance
coverage on your property in
response to those notices, we provide
this policy at their request.
b. The rates charged for this policy may
be considerably higher than those
that may be available to you if you
contact your local insurance agent
(or the WYO company at ...).
c. The amounts of insurance coverage
provided in this policy may not be
sufficient tc prctect ycur full equity
in the property in the event of a loss.
d. You may contact your local
insurance agent (or WYO company
at ...) to replace this policy with a
conventionally underwritten
Standard Flood Insurance Policy, at
any time, and typically at a
significant savings in premium.
The WYO company may add other
messages to the dec.larations page and
make minor editorial modifications to
the language of these messages if it
believes any are necessary to conform to
the style or practices of that WYO

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messages or modifications must not
change the meaning or intent of the
above messages.
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Since the amount of underwriting data
obtained at the time of policy inception
will typically be limited, the extent of
any coverage limitations (such as, when
replacement coverage is not available or
coverage is limited because the building
has a basement or is considered an
elevated building with an enclosure) wd!
be difficult to determine. It is, therefore,
the responsibility of the WYO company
to notify the mortgagorlinsured of all
coverage limitations at the inception of
coverage and impose any that are
applicable at the time of the loss
adjustment.

16. Policy Reformation-Policy
Correction
Article VI1.G of the Dwelling Form and
the General Property Form will apply as
appropriate.
Examples of circumstances under which
refmmation or correction might he
needed would be:
a. Policy Reformation-The wrong flat
rate was applied for the zone in
which the property was actually
located.
b. Policy Correction-The amount of
coverage exceeds the amount
available under the NFIP for the type
of building occupancy that represents
the building insured. In such cases;
the amount of coverage would have
to be adjusted to the amount
available and any appropriate
premium adjustments made.

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MPPP Guidelines and Requirements

:7. CsF-crageEasis-Acks!
or Replacement Cost

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There are no changes from the standard
practices of the NFIP for these
provisions. The coverage basis will
depend on the type of occupancy of the
building covered and the amount of
coverage carried.

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must be completed according to the
underwriting requirements of the SFIP,
as contained in the NFIP Flood
Insurance Manual. The NPPP policy
may be endorsed to assign it under rules
of the NFIP. It may also be endorsed for
other reasons such as increasing
coverage.
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18. Deductible
23. Assignment to a Third Party

A $500 deductible is applicable for
policies w~ittenunder the MPP?.

19. Federal Policy Fee
There is no change from the standard
practice. he Federal Policy Fee in
effect at the time the MPPP policy is
written must be used.

The MPPP policy is a 1-year policy. Any
renewal of that policy can occur only
following the full notification process
spelled out in Addendum 2 that must
take place between the lender (or its
authorized representative) and the
insuredmortgagor, when the
insuredmortgagor has failed to provide
evidence of obtainkg a substitute flood
insurance policy.
21. Cancellations
The NFIP Flood Insurance Manual rules
for cancellation/nullificationare to be
followed, when applicable.
22. Endorsement

Current i@iP rules remain unchanged;
therefore, an MPPP policy may be
assigned to another mortgagor or
mortgagee. Any such assignment must
be through an endorsement, however.
24. Article XIII-Restriction
Flood Insurance

on Other

Article XI11 of the Arrangement is also
applicable to the MPPP and, as such,
does not allow a company to sell other
flood insurance that may be in
competition with NFIP coverage. This
restriction, however, applies solely to
policies providing flood insurance. It
does not apply to insurance policies
provided by a -W/'k70 company in which
flood is only one of several perils
covered, or when the flood insurance
coverage amounts are in excess of the
statutory limits provided under the WIP,
or when the coverage itself is of such a
nature that it is unavailable under the
NFIP, such as bIanket portfolio
coverage.

An MPPP policy may not be endorsed to
convert it directly to a conventionally
underwritten SFIP. Iiafher, a new poiicy

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MPPP Guidelines and Requirements

Federz! Ezergezcy ,Mac~gnmer?tA U P ~ ~ T T
Federal Insurance Administration

Mortgage Portfolio Protection Program
Guidelines and Requirements
Addendum 1

INITIAL PORTFOLIO REVIEW
MORTGAGOR NOTIFICATION PROCESS
Once it has been determined by the lenderlsen~iceror its representative that flood insurance is
needed on mortgages in the lender's portfolio, and there is no evidence of flood insurance, and it
decides to use FIA's id?PP to assist in bringing the lender's portfolio into compliance with flood
insurance requirements, then the following notification process must be used.
This process will consist of three initial notification letters. Each letter will contain certain
messages, at a minimum, in the body of the letter. The lenderlservicer (or their authorized
representative) may add their own messages, make minor editorial modifications to the messages
to conform to the style and practice of the WYO company or lender, and structure the letter to
their l h n g , but they may not alter the meaning or intent of the messages listed here for any of
the letters.
Each letter will contain mandatory messages on one or more of the following items: (1) The
requirements of the Flood Disaster Protection Act of 1973; (2) reminding the insured of the
previous letters sent that resulted in the current flood insurance policy; (3) the high premiums on
the current policy; (4) potentially inadequate coverage limits; (5) coverage limitations; and (6)
the options available to the insured.

First Initial Notification Letter
The first letter is to be issued after the review of the lender's portfoiio reveals the need for the
and the absence of it. This letter must contain, at a minimum, the
flood insurance coverage
follouling messages:
1. "The Flood Disaster Protection Act of 1973, a Federal law, requires that flood insurance be
purchased and maintained on mortgage loans for buildings (and their contents, if appropriate)
for the life of the loan for buildings located in a Special Flood Hazard Area (SFHA) shoua
on a map published by FEMA. T h s applies to such loans from lending institutions that are
under the jurisdiction of a Federal regulatory agency or instrumentality."
2. "We have determined that your property (building), on whch we hold the mortgage loan, is
located iri S F U aii4 theref~re,you are recpke:! b j r !2w to have 2 pslicy of flood
insurance on that property."
This letter must then include language advising the mortgagor that in the event they wish
to challenge the zone determination, they should provide written factual evidence
7
MPPP Guidelines and Requirements Addendum I

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challenge obtaized ffom a cr;~1;1~c;&~cElcia! 33_.
;egis:ered e z g k e e ~ ,
architect, or surveyor, stating the specifics of the location of the building and the reason
for their challenge. The letter must include reference to the appeal process required in
Section 524 of the National Flood Lnsurance Reform Act of 1994, and to the replations
promulgated to establish the procedures and process for such review.
illCu

The lenderlservicer is reminded that since the Act places the responsibility of determining
the flood zone location of each mortgaged property on the lenderlservicer, he cannot
discharge that responsibility by simply obtaining some form of self-certification from the
mortgagor. If the lender wishes to change its original determination on the location of the
mortgagor's property based upon information submitted by the mortgagor, the
lenderlservicer must convince itself, after reviewing that submission, that its original
determination was in error and make any such chaiige based on thzt review. He should
not simply accept unsubstantiated allegations, from whatever source, as to the building's
flood zone location. The ultimate responsibility for malung such determinations under the
statute rests with the mortgagee, not the mortgagor.
3. "There is no evidence in your mortgage loan file of your having a flood insurance policy on
your property. In case this information is in error, please contact us at ..."

4. "If you do not have a flood insurance policy on this property, you may wish to contact your
local insurance agent (or WYO company at ...)."
"If you do not respond within 45 days of this letter, either providing evidence of a flood
insurance policy in effect on this property, or requesting that we provide you with such
coverage, the necessary flood insurance coverage will be provided for you. In that event,
since certain insurance underwriting information about your property that is necessary to
determine the appropriate flood insurance rate for your policy would not have been obtained,
due to your not responding, the Federal government's Mortgage Portfolio Protection
Frogrzm's flood h ~ ~ i a i rzies
l ~ e will hzve to be used. These rztes n z j I be considerably higher
than those that could be obtained for you if you respond ro rhis nodce."
This letter, or an attachment, must also include such other information as: (1) the name of the
lenderlsen~icer,(2) the mortgage loan number, (3) the address of the property in question, (3) the
flood zone in which the property has been determined to be located, (5) the amount of flood
insurance being required, and (6) coverage limitations.
Second Initial Notification Letter

This letter will be sent 30 days following the first initial notification letter, if no response has
been received from the mortgagor. It will contain, at a minimum, the following messages:

1. "About a month ago you were notified that Federal law requires all mortgages, such as yours,
on properties determined to be located in a Special Flood Hazard Area, to be covered by a
policy of flood insurance."

8
ME'PP Guidelines and Requirements Addendum 1

.7

r,aL i,LL,r :xeniion& t h ~ ift you
not respond po~.It.>~e!y
within 45 22;~sf r o 3
it would be necessary to obtain a policy of flood insurance for you."
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letter,

3. "This is to remind you that since you have not responded to the earlier notice as yet, and if
you do not respond within the next 15 days (or the actual expiration date), flood insurance, as
mentioned previously, will be obtained on your property, on your behalf."
4. "In the event that you do not respond and the coverage must be obtained as mentioned, the
cost of that coverage may be significantly hgher than the premium that you could obtain if
you were to contact your local insurance agent (or WYO company at ...)."

Third and Final Initial Notification Letter
This letter must be sent to the mortgagor accompanying the flood insurance policy declarations
page.
This letter must be sent as soon after the end of the 45 day notification period as possible, if no
positive response has been received to the two previous notification letters. It must contain the
following messages, at a minimum:

1. "This letter is to inform you that a policy of flood insurance has been obtained on your
behalf, to cover the mortgage on your property, as required by the Flood Disaster Protection
Act of 1973."
2. "You have been notified on two previous occasions explaining the circumstances
surrounding your need to have flood insurance coverage and explaining your options, but to
date no response has been received."
3. "Attached is the flood insurance policy purchased on your behalf and its accompanying
declarations page that explains: the z i n o ~ aof
t coverage purchased or, y o u behalf, its cost,
some limitations to that coverage, and the options you may still wish to exercise io obtain
similar coverage, but typically at a significantly lower cost."
4. "If you purchase another flood insurance policy and notify us, or contact us to request that
we purchase a substitute policy under the hTIP for you, we will cancel this policy and issue
you a refund for the unearned portion of the premium, if we deem that the other policy is
acceptable to satisfy the requirements."

9
MPPP Guidelines and Requirements Addendum 1

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FederaI Insurance Administration

Mortgage Portfolio Protection Program
Guidelines and Requirements
~ d d e n d u m2

MPPP RENEWAL/EXPLRATION
MORTGAGOR NOTIFICATION PROCESS
When an MPPP policy has been purchased and the expiration date of that policy is approaching
the end of its 1-year term, and the insured has not requested or produced a substitute policy of
flood insurance, the following notification process will be foilowed.
This process will consist of a total of three (or, at the lender's option, two) renewal MPPP letters.
Each letter will contain certain required messages within the body of the letter. The
lendedservicer (or their authorized representative) may add their own messages, make minor
editorial modifications to the messages to conform to the style and practice of the WYO
company or lender, and structure the letter to their liking, but they may not alter the meaning or
intent of the messages listed here for any of the letters.
Each letter will contain mandatory messages on one or more of the following items: (1)
reminding the insured of the previous letters sent that resulted in the current flood insurance
policy that is about to expire; (2) the requirements of the Flood Disaster Protection Act of 1973;
(3) the h g h premiums on the current policy; (4) potentially &adequate coverage limits; ( 5 )
coverage limitations; and (6) the options available to the insured.

First MPPP RenewaVExpiration Notification Letter
The first MPPP RenewzlExpiration Notification Letter will be sent to the hsured/mortgagor at
least 45 days prior to the renewal/expiiztion of the W P P policy. It will, at a ainimum, contain
the following messages:
1. "This letter is to notify you that the flood insurance policy that was required to be purchased
on your property about a year ago is about to expire."
2. "When you were originally notified of the need for t h s coverage, it was explained that the
Flood Disaster Protection Act of 1973, a Federal law, requires that flood insurance be
purchased and maintained for the life of the loan, on mortgage loans for buildings (and their
contents, if appropriate) located in a Special Flood Hazard Area shown on a map produced
by the Federal Emergency Management Agency."
3. "The premium on the flood insurance policy currently in effect and written on your behalf,
and due to expire, may be considerably hgher than would be the case if you had responded
to the suggestions contained in the previous notices sent you, recommending that you contact
your local insurance agent (or the WYO company at...), which you may still do, to obtain a
conventionally underwritten Standard Flood Insurance Policy."
10
MPPP Guidelines and Requirements Addendum 2

4. "As has been mentioned in previous no~ices,you inay wisn 10 repiace &is poiicy wi& a

conventionally underwiitten Standard Flood Insurance Policy now, and benefit from rates
that potentially are significantly lower than the rates being used with this policy."
5. "Failure to respond to this notice withn 45 days (or by [date]) will result in this policy being
renewed, and at rates that are most likely to be much higher than are otherwise available."

Second MPPP RenewaKExpiration Notification Letter
The requirement for the second MPPP RenewaYExpiration Notification Letter is optional on the
part of the participating WYO company. If such a company decides not to issue the second of the
three notices (letters), then the third MPPP RenewalExpiration Notification Letter required in
the March 1, 1991, Federal Register will serve as the second and final notice required. The
language of such a letter may be modified, if needed, to reflect the fact that only two such letters
were sent.

Third and Final MPPP RenewaVExpiration Kotification Letter
The third and final notice will be sent out as part of the renewed MPPP policy. The notice
containing the following required messages may be sent as a cover letter or an attachment to the
policy declarations page and policy itself, or the required messages may be included on the
declarations page that accompanies the renewal policy. It must contain the following messages:
1. "Since you have not responded to our previous notices that your flood insurance policy,
which is required by Federal law, was about to expire, we have renewed that policy for the
next year."
2. "As has been previously explained, the Flood Disaster Protection Act of 1973, a Federal law,
requires that flood insurance be purchased and maintained on mortgage loans for buildings
(and their contents, if appropriate) for the life ofthe ioan, for property located in a Special
Flood Hazard Area shown on a map produced by the Federal Emergency Management
Agencj~."
-

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3. "The premium on this flood insurance policy just renewed may be considerably higher than
would be the case if you had contacted your local insurance agent (or WYO company at ...),
which you may still do, to obtain a conventionally underwritten Standard Flood Insurance
Policy."
4. "If you purchase another flood insurance policy and notify us, or contact us to request that
we purchase a substitute policy under the NFIP for you, we will cancel t h s policy and issue
you a refund for the unearned portion of the premium, if we deem that the other policy is
acceptable to satisfy he requirements."

11
MPPP Guidelines and Requirements Addendum 2

Feaerai Emergency ivianagemeni- Agency
Federal Insurance Administration

Mortgage Portfolio Protection Program
Guidelines and Requirements
Addendum 3

QUESTIONS AND ANSWERS:
PORTFOLIO REVIEW CONSIDERATIONS
What is the NIPPP?
The MPPP is a tool for providing flood insurance coverage to properties which are part of a
lending institution's mortgage portfolio when such properties have been determined to be in
a Special Flood Hazard Area and therefore subject to the flood insurance purchase
requirement mandated by Federal law.
2. What is the first step in using the MPPP?
The MPPP is intended to be utilized only when the lender (or its representative) has reviewed
its portfolio and determined which of the loans are on buildings located in a Special Flood
Hazard Area (SFHA), and, therefore, in need of flood insurance.
3. What source of information should the MPPP participant, or their authorized
representative, be using in reviewing a loan portfolio, to determine flood zone location
of the properties in question?

The flood insurance maps published by the Federal Emergency Management Agency
(FEMA), augmented by other official documentation available from local officials or other
sources, as may be deemed necessary, should be used.
The Flood Eisaster Protection Act of 1973, which i m p ~ s e the
s flood hsu,race requkement,
makes specific reference to "areas identified by the Secretary (since changed to Director [of
FEMA]) as an area having special flood hazards". The National Flood Insurance Act of 1968,
as amended, charged FELL4 with the responsibility of identifying areas which have special
flood hazards. Therefore, the official source of information that serves as the basis for
identifj~ingsuch areas is the maps published by FEMA.
4. What if a source of information other than the FEMA maps is used as the basis for
determining the flood zone location of properties?

The lender may be risking erroneous determinations, fnereby po~endaiiyplacing the lender in
a position of a liability exposure, bad customer relations, and/or probleins with its Federal
regulatory agency or worse.

12
MPPP Guidelines and Requirements Addendum 3

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Due to the potential for problems as mentioned above, the lender must be carefkl as to the
basis behind the system it uses to make these flood zone determinations. Also, since the
lender must keep evidence of the determination in every mortgage file, if that evidence
doesn't reflect the map panel used to make the determination, the lender may have difficulty
proving to its Federal regulatory agency, or in court if the need arose, that the lender is
complying with the law.

6. What flood zone determination information should the lenders keep in each
mortgagor's file to indicate evidence of compliance?
Pursuant to Section 528 of the National Flood Insurance Reform Act of 1994, FEMA
developed a Standard Flood Hazard Determination Form (SFHDF) for use by lenders when
determining, in the case of a loan secured by improved real estate or a mobile home, whether
the building or mobile home is located in a special flood hazard area. The SFHDF contains a
section for recording flood zone determination information. All lenders subject to the Reform
Act will have to place a copy of the SFHDF in each mortgagor's file to indicate evidence of
compliance.
7. What version of the flood map should be used in conjunction with the MPPP portfolio
review?
The FEMA map in effect at the time of the portfolio review is the map that must be used. The
provisions of the Flood Disaster Protection Act of 1973 as amended by the Reform Act: (1)
require the lender to notify the borrower that the borrower should obtain flood insurance, at
the borrower's expense, if, at any time during the term of the loan, the lender determines the
improved real estate or mobile home securing the loan is located in an area identified by
FEVA as an area having special flood hzzzrds and in m~hchflood insurance is wailable but
the property is not covered by flood insurance; and (2) require the lender to piirchase
coverage on behalf of the borrower if the borrower fails to purchase such flood insurance
within 45 days after notification by the lender.

8. Doesn't the fact that the MPPP was designed to assist lenders/servicers in bringing their
portfolios into compliance with flood insurance requirements mean that they will be
dealing with loans that can range from being very new to being many years old, and
that the maps that may have been in effect at the time of the loan origination might not
be readily available now?
Yes. However, this does not present a problem since, as mentioned in question 7 above,
conp!iancs with the Reform -'ct rsq~iresuse of the map in effect at the time of the review
rather than the map in effect at the time of the loan origination.

13
MPPP Guidelines and Requirements Addendum 3

?

Ozce the !e~r',er!ser:?cer's px-tfn!fc h3s heen re~riewed2nd determirrrtin~sF w e been
made as to which properties need flood insurance, is there anything critical that the
lender (or its representative) should consider before beginning the process of mailing
the initial notices to their mortgagors?
The lender should consider how the mailing will be handled and the results of that mailing.
There is a strong likelihood that, once the mailings begin, a certain percentage of the
mortgagor recipients of those notices will challenge the notices. Some of those challenges
will be directed, in one way or another, to the lenderlservicer, regardless of any instructions
in the notices. The lender should therefore determine at the outset whether it wants the
notices to be sent all at once, or sent in batches. The larger the volume, the more
consideration the batch approach should be given.
Also, the lender needs to consider how it wants the review of its portfolio carried out. If the
results of the review are provided to the lender all at the same time and the lender decides to
send the notices to the mortgagors in batches, it may be exposing itself to additional liability.
This could occur since the lender was aware of all the mortgages in its portfolio that needed
flood insurance, but acted on only a certain number at a time. The lender, therefore, needs to
consider having the portfolio review carried out in such a fashon that the results of each
portion of that review are made available to the lender as soon as they are available from the
party conducting the review, and are acted upon as soon as possible thereafter.

14
MPPP Guidelines and Requirements Addendum 3

Ferler~!E ~ e r g e n r yMT~agament LgA~ry

Federal Insurance Administration

Mortgage Portfolio Protection Program
Guidelines and Requirements
Addendum 4

QUESTIONS AND ANSWERS:
OTHER CONSIDERATIONS
1. What is the MPPP and what is it designed to do?
The MPPP is a tool made available to the lending and mortgage servicing industries that
provides them with the capability to write flood insurance policies quicker and easier that
u7ill assist them with their efforts to bring their portfolios into compliance with flood
insurance requirements.
2. Is the MPPP available to lenders for all their loans?
No. It may be used only in conjunction with loan portfolios. It may not be used as a
compliance vehicle for loan originations.
3. Is the MPPP mandatory for lenderslservicers?

No. It is voluntary, but lenderslservicers that believe their loan portfolios may not be in
compliance with flood insurance requirements are strongly encouraged to use it if they
believe it could be helpful.
4. What are the benefits of the MPPP?
Tie specific benefits will vary with the category of participant as foiiows.
For lenderslservicers:
.
Portfolio compliance with flood insurance requirements.
Reduction or elimination of certain potential liability.
Protection of equity (lenderlservicer, borrower).
For WYO companies:
Increased policy sales and fees.
Increased lenderiservicer client base.
For s u r z c t p , agents:
Increased policy sales and commissions.

15
MPPP Guidelines and Requirements Addendum 4

5. Ls it ~ e s s i 5 l efer !E!f)comp~12esznd fr_s?rrmce 3get?tr fn hnnefi_f f r n z the MPPP w e n
if they don't directly participate in it?

Yes. Property insurance ( f ~ and
e auto) is already being sold by insurance agents to many of
these same borrowers because lenders require it in conjunction with home mortgages and
auto loans. As a result, many agents already have established business relationships with
their local lenders. These agents could alert these lenders to the availability of the MPPP and
advise them as to how to proceed even if the agent was not going to directly participate.
At the same time the agent could offer to assist the lender with determining the flood zone
location of the addresses of all new mortgage loan applications for that lender and ask, in
return, for the opportunity to write all the flood insurance policies on those properties that are
..
detelimiiied to need it. The iiotices that wi! be sent t~ the borrowers will gener~tc~ IY-u
~ ~ I I ~ ~ I P S
and sales.

6. How will flood policies actually be sold under the MPPP?
Policies will be written through the insurance companies participating in FIA's Write Your
Own (WYO) Program.

7. Will all the insurance companies participating in the WYO Program be writing policies
under the MPPP?
Any WYO company may write policies under the MPPP, but only those that traditionally
have dealt with the lending industry participate in this Program. Any such company that does
wish to participate must agree in writing to comply with the requirements of the MPPP.

8. Does FIA maintain and publish a list of the WYO companies that participate in the
R'IPPP?
Yes. Such a list has been developed 2nd is modified and repblished as needed.

9. What is the first thing a lenderlservicer shouid do if it wishes to utilize the MPPP?
The lender must review its loan portfolio and detennine which of the properties are located in
Special Flood Hazard Areas (SFHA).

10. When a lenderlservicer decides to utilize the MPPP, must they use the M P P P to service
their portfolio all a t the same time?
No. Lenderslservicers should carefully analyze the pros and cons of phasing in their portfolio
compliancp & ~ r t .(See Addendum 3, question 9.)
11. Is use of the MPPP limited to only those properties located in SFHAs?
Yes.
16
MPPP Guidelines and Requirements Addendum 4

13

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located in an SFHA?
If no loss has occurred at the time the situation is discovered but the mortgagee wants the
borrower to have flood insurance even though the property is not in an SFHA, the situation
can be corrected by canceling the MPPP policy and rewriting the coverage under a
conventional Standard Flood Insurance Policy (SFIP) with a refund of any premium
overpayment. If such a situation is discovered after a flood loss has occurred, the claim will
be honored. However, the MPPP policy would have to be cancelled and the coverage
rewritten under a conventional SFIP with a refund of any premium overpayment. The loss
should then be reported under the new policy number. Under both scenarios, the effective
date of the conventional SFIP would be the same as that of the canceiled MPPP policy.
13. What differences are there between a flood policy sold under the traditional flood
insurance program and one under the MPPP?

The actual policy and coverage are the same, but there are differences primarily in the areas
0

f
rates,
a letter notification process to the borrowers,
the underwriting information necessary.

14. What are the rate differences?
The rates under the MPPP are, on the average, several times those used under the traditional
flood insurance program.
15. Why are the MPPP rates so high?
Because the borrower did not respmd to the nsticcs sefit, key i ~ f ~ ~ xcsssary
- ~ t i ~tn~
underwrite the risk is not available. Therefore, it is necessary to aswine that those properties
have a very high risk and the rates charged reflect that risk.

16. Does the borrower have any option in avoiding the MPPP policy with its higher cost?
Yes. The borrower can simply contact a local insurance agent, obtain a conventionally
underwritten flood insurance policy, and present it to the lenderlservicer.
17. If a borrower pays off the mortgage loan, can the MPPP then be cancelled?

Yes, but any refund due the borrower will be paid on a pro-rata basis.
18. If the borrower or lenderlservicer sells or assigns the mortgage to another borrower or
lenderlservicer, can the h$PPP policy be assigned?

Yes. The Standard Flood Insurance Policy language allows for the assignment of all NFIP
policies. Any such assi-ment of an NFIP policy must be done by way of an endorsement.
17
MPPP Guidelines and Requirements Addendum 4

r

I?. M ~ s 2t WC)r_em.Ean:T
. nrrticfnatf~gin the W P P maintain e n c i ~ sof 211 its ~
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P

P

documents?

The companies are responsible for the data on each Application Form, in keeping with its
normal practices. Although some of the data beyond that required does not have to be
reported, the companies are still responsible for it. The WYO coinpanies may use their
normal business practices in determining which form they will use to retain data, forms, or
other required information.

20. Who initiates the notification letter process required by the MPPP?
Lenders/sen~icersdffer on how their force-placed hazard insurance notices are sent to their
borrowers. Some lenders insist or, sendkg ssch noticss directly. Others let thz hsix-ance
company, with whom the force-placed policies are written, send out the notices. Since the
MPPP is a part of the NFIP, policies written through the MPPP must comply with all NFIP
requirements, regardless of the entity that actually sends the notices.
21. Must the lender o r WYO company maintain copies of the notification letters?
The WYO company is responsible for assuring that the letters are sent regardless of whether
the company or the lender actually sends them. The WYO company must maintain evidence
that the letters are being sent. It will be the WYO company's decision as to the form the
evidence takes, such as paper copies, microfiche, computer images, or a record of addresses
of the mortgagors to whom the letters were sent with an indication as to the date when those
mortgagors were notified.
22. What does a WYO company do if the information that FIA requires on the declarations
page won't fit on that page?
The compaEy may wish to include some of that information on the declarations page and
sGme on an "endorsement." In such a case, it should indicate an eendcrsement r,uxber on the
declarations page.
23. Does a policy declarations page have to be issued each time an MPPP policy is
renewed?

Yes, and it must accompany the final renewal notification letter.
24. When an MPPP is renewed, can the same policy number that was assigned to the
original MPPP policy be used?

Yes.
25. Mrill the rating'credits that will be available in a community participating in the
Community Rating System (CRS) apply to a policy written under the MPPP?

No.
18
MPPP Guidelines and Requirements Addendum 4

26. The MPPP requirements call for the full map panel number and date to be obtained.
What does the WYO company do with that information since the NFIP Application
Form in use today doesn't contain enough space to even capture all this information?
The WYO companies have never been required to use NFIP forms in the WYO program, but
have been free to develop their own forms. They are, however, responsible for all required
data, some of which must be reported and some of which isn't, but must be kept in the
company files. The data requirements for the MPPP follow the same conditions. The full map
panel number for that panel used to determine flood zone location and rate the policy is the
one that must be captured and maintained. The majority of the maps FEMA has published for
many years have the 10-digit number, suffix, and date for each panel. Some of the maps still
in use have only the 6-digit community number and date. The 6-digit community number
cannot be used when the 10-digit number exists.
27. Is contents coverage under the MPPP optional?
Yes. The lender must decide whether or not it will require contents coverage as part of the
MPPP policy.
28. What is meant by the term "coverage limitations" that is mentioned in the MPPP
materials?
"Coverage limitations" primarily means Actual Cash Value coverage instead of Replacement
Cost coverage, when appropriate. It could also apply, however, to the situation where only an
amount to cover the loan balance is purchased which may be insufficient to cover the full
insurable value of the property. The WYO company will have to detennine what limitations
may apply depending on the decisions of the lenderlservicer as to how it wants to use the
MPPP and the amount of underwriting information obtained.

29. The notification process contains standards for the letters being mailed and the MPPP
policy being written sach 2s 4 5 3 0 , and I5 days. K a s t these standards be strictly
adhered to?
There are a number of standards similar to this in the NFIP. Some limited flexibility has been
built into the actual implementation process 'hough the underwriting review PI-ocessthat
FI,4 uses with the companies.

30. May WYO companies, under the requirenients of the MPPP, use any portion of the
MPPP fee they retain for any purpose other than as a ccmmission to an insurance agent
or agency for their writing the policy, such as for flood zone determinations or the
tracking of loans?

No.

19
MPPP Guidelines and Requirements Addendum 4

Federal Emergency Management tigencv
Federal Insurance Administration

Mortgage Portfolio Protection Program
GuideIines and Requirements
Addendum 5

RECEIPT FOR mTERIALS
The Federal Lnsurance Administration (FIA) has published a package of materials for
implementation of the National Flood Insurance Progam's Mortgage Portfolio Protection
Program (MPPP) by & T O companies and lending institutions andlor mortgage servicing or
similar companies. The implementation package contains the following:
Cover letter from the FIA Admistrator
Guidelines and Requirements
Addendum 1: Initial Portfolio Review Mortgagor Notification Process
Addendum 2, h P P P RenewalExpiration Mortgagor Notification Process
Addendum 3, Questions and Answers: Portfolio Review Considerations
Addendum 4, Questions and Answers: Other Considerations
Addendum 5 , Receipt for Materials (this document)
Addendum 6; Agreement to Adhere to the Guidelines and Requirements.
Any W0 company that offers the h P P P to a lender/senricer must provide this Receipt and the
following Agreement (Addendum 6), together with the complete implementation package
referenced above, to the lenderlsen7icer. To participate in the MPPP as a means of bringing its
portfolio into compliance with flood insurance requirements, the lenderlservicer must sign t h ~ s
Receipt and the following Agreement as evidence of having received the implementation
package and agreeing to comply with the guidelines and requirements contained therein.
This Addendum is to achowledge that the package of implementation materials for the National
Flood Insurance Program's Mortgage Portfolio Protection Program [MPPP) has been provided
and received on the date(s) indica~ed.

- -

Name of TWO colzlpa-y's
representative providing package

Na=e of lenderlinortgage senricer's
representative receiving package

Name of WSO company represented

Name of lender/mortgage senricer represented

Dare package provided

Date package received

WYO companies are required to keep a copy of this Receipt and the follou~ingAgreement in
their files for each 7enderlmortgage servicer to which they provide services under the Mortgage
Portfolio Protection Program. Lenderslmortgage senricers may wish to do the szme.
20
lMPPP Guidelines and Requirements Addendum 5

Federal Emerzencv Management Agencv
Federal ~nsuranceAdministration

Mortgage PortfoLio Protection Program
Guidelines and Requirements
Addendum 6
AGREEMENT TO ADHERE TO THE GI;?DELINES ,4ND REQUIREMENTS O F
THE MORTGAGE PORTFOLIO PROTECTION PROGRAM, 2006-2007
In conjunction with acceptance of the offer by the Federal Insurance AdmLnistration (FIA) to
enter into a Financial AssistanceISubsidy Arrangement, TTTritcYour Own companies may
optionally elect to participate in the Mortgage Portfolio Protection Program (NIPPP) of the
National Flood Insurance Program. To participate in the MPPP, the Write Your Own company
must agree to adhere to all Guidelines and Requirements contained in the implementation
package published by FIA. This Addendum is to indicate and provide evidence of the
company's acceptance of these terms.
Please complete the section below for the individual in your organization designated as the
contact person for h@PP services 2nd questions.
A separate fo7-nz nlrust be submitted for each conzpany.
MPPP Contact Name
Address
Telephone Number
In witness whereof, the parties hereto have accepted this Agreement on this

GroupIParent Company
Writing Company

NAIC Number

Print Name
Title

-The United States of America
U.S. Department oEHomeland Security
Federal Emergency Management Agency
Acknowledged
Administrator
Federal Insilrance Administration
h P P P GuideIines and Requirements Addendum 6

day of