Big Mortgage determines families have to pay flood insurance even though their houses have always been outside the flood plain... could this happen to you?

In the fall of 2005, two months after Katrina, a family's house in downtown Colorado Springs was declared to be in a 100-year flood zone by their mortgage company (World Savings at the time, now Wachovia), who then demanded expensive flood insurance. They had lived in the house 13 years without flood insurance and were 3 1/2 years into their mortgage agreement.

The family requested proof that their house had been moved into the 100-year flood zone. The FEMA federal insurance rate maps (FIRMs) do not depict building/floodplain relationships. A satellite photo was provided by Wachovia with a FIRM overlaid by hand with legal text that says it "should not be relied upon" and "is not intended to satisfy any regulatory guidelines". Five of these "unreliable" maps were provided over time, each with different positioning of the FIRM (which may constitute intentional criminal fraud).

Since the mortgage company could not provide a legal, authoritative map, the original engineering map (showing houses and other structures related to the flood plain) and paper-trail sign off were located. These maps provide two important facts: 1) Current revisions and previous revisions do not affect the house in question. 2) The house is clearly outside the 100 year flood plain and, not insignificantly, abuts the 500-year flood plain.

At Michael Baker (the engineering firm to which FEMA outsources determinations), three flood plain engineers stated for the record in a conference that the flood base flood elevation (BFE) is 16 feet above the streambed, and that if a certified survey were done proving the property above that elevation, FEMA would declare the house "out as shown" on the maps. Four hundred dollars was spend on a certified survey to confirm the minimum elevation on the property at a foot above the 16 foot BFE. The city utility map with elevation contours also confirms the house at this elevation. When this information was presented to FEMA for an "out as shown" determination, the Michael Baker engineers changed their minds about the BFE, moving the bar up to 18.7 feet above the streambed.

The house is 118 years old and has never flooded. There has never been any water damage to the original fir floors and there are no water marks on the original lathe-and-plaster walls. The dirt floor in the crawl space is powdery and there are no indications of there ever being any water damage, water flow or subsequent drying of mud. Some neighbors in 1961 experienced a "500-year flood" in which homes along Shooks Run were wiped out and a railroad bridge downstream was washed away with several fully loaded coal cars on it: the coal cars were never found. In this eyewitness account of that horrendous deluge, the house in question was not flooded. What Wachovia is attempting is akin to redefining the sky as green.

Amazingly, an ELOC was taken out and the new lender agreed to sign the contract contingent on a determination of "out as shown" on the FEMA maps. The resulting FEMA/Homeland Security documentation was presented to FEMA who agreed in writing that it "fulfills the audit requirements" of that lender. FEMA did not dispute the determination. In a recent conversation on the record, a FEMA representative stated "it is possible that there are conflicting results. It just depends on their interpreting the map, because the map's not property-specific, it doesn't show property lines, nor does it show elevations."

Casey Fults, a Wachovia spokesperson, stated in writing that the FEMA guidelines are: "until a map is physically amended or revised, lenders are bound by the information shown on FEMA maps". When confronted with the facts regarding FEMA maps, FEMA's acceptance of other "out as shown" determinations and FEMA's assertion that different interpretations are acceptable, she repeated a well-worn mantra that Wachovia only accepts a Letter of Map Ammendment (LOMA) and that this is Wachovia's "policy". This puts the homeowners in an impossible position. The existing FEMA maps don't need to be ammended because they show the property out of the flood zone and FEMA accepts those determinations. But a LOMA would put the house in the flood zone because the Michael Baker company has arbitrarily raised the bar.

The situation takes on a sinister tone when timing and money trail are considered. After Katrina, suddenly fixed-income retirees are paying hundreds or thousands of additional dollars per year for "flood insurance" without legal proof that their houses have been moved into the flood plain. A FEMA representative confirmed that FEMA receives 66% of flood insurance money. What's truly amazing is that FEMA is OK with a "gray area" determination as long as there's proof but Wachovia doggedly refuses to deviate from their inhouse "policy", even though they don't make any money from it.

Summary: There are six sources of authoritative scientific/engineering proof and historic proof that this family's home is not in the 100-year flood plain while the mortgage company has only "unreliable" satellite photo maps to force payment of thousands of dollars of "flood" insurance. The family has refused to pay for flood insurance and Wachovia has threatened them many times with foreclosure and made a negative credit report that they are late paying their mortgage. This could happen to you and your family, too.

All attorneys who have been contacted have declined involvement because of the scope of the case (Big Mortgage). Because the family can't afford a lawyer, legal work would have to be done on a contingency basis. The family has tried to resolve the situation through the Better Business Bureau, AARP's fraud prevention office, their congressman, and privately-underwritten mortgage loans which don't require flood insurance.

Any agency placing a monetary claim should have to prove their claim, not the other way around. If you are experiencing the same situation and may be interested in a class action lawsuit, contact the family through this "flood insurance fraud" email. If you are an attorney interested in taking on big mortgage, you can contact the family through the same email.