Big Mortgage determines families have to pay flood insurance even though their houses have always been outside the flood zone... could this happen to you?
In the fall of 2005, two months after Katrina, our house in downtown Colorado Springs was declared to be in a 100-year flood zone by World Savings (then Wachovia, now Wells Fargo), who then demanded shockingly high flood insurance payments. We lived in the house 13 years without flood insurance and were 3 years into our mortgage contract.
We requested proof that the house had been moved into the 100-year flood zone. The FEMA flood insurance rate maps (FIRMs) do not depict building/flood zone relationships. A Google Earth photo was provided by Wachovia with a FIRM overlaid by hand with legal small print 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 World could not provide a legal map, the original engineering map was located, which clearly shows our house outside the 100 year flood zone.
The house is 120 years old and has never flooded. There has never been any water damage to the original fir floors and there are no water marks inside the original lathe-and-plaster walls.
An equity loan was taken out and the new lender agreed contractually the house is "out as shown" on the FEMA maps. The resulting determination was presented to FEMA who agreed in writing that it "fulfills the audit requirements"; FEMA did not dispute the determination.
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 FEMA's acceptance of our "out as shown" determination, Wachovia stated that they only accept a Letter of Map Ammendment (LOMA). Since 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, our dispute was at an impasse.
The situation takes on a sinister tone when timing and money trail are considered. After Katrina, suddenly fixed-income retirees are paying tens of millions of additional dollars per year for "flood insurance" without legal proof that their houses have been moved into a flood zone. Dan Carlson, a regional FEMA employee, confirmed that FEMA receives 66% of flood insurance money. FEMA accepts determinations based on their (FEMA's) engineering study maps but Wachovia refuses to accept anything but the "not to be relied upon" Google Earth maps, FEMA, too, accepts the unreliable maps, even though they directly contradict FEMA's own maps.
Summary: There are six sources of authoritative scientific/engineering proof and historic proof that our home is not in the 100-year flood zone while the mortgage company has only "unreliable" Google Earth maps to force payment of thousands of dollars of "flood" insurance. We have refused to pay for flood insurance and Wachovia has threatened us many times with foreclosure and made negative credit reports.
This could happen to you and your family, too.
We have tried to resolve the situation through the Better Business Bureau, AARP's fraud prevention office, our congressmen, 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.
3/16/2010 Update. Our El Paso County Civil Court breach of contract case was heard on February 4, 2010.
A non-FEMA employee testified under oath that a preliminary 2004 document (which the judge determined to have errors) posted on FEMA's web site "is a FEMA map". In court, we challenged its legal status because the requirements for a new flood map were never fulfilled. FEMA later determined that it never became an effective map (see next paragraph). The judge's verdict was that our lender may take flood insurance money from our escrow account because of the text of the NFIP.
FEMA issued a new LOMR dated 3/3/10 (case 10-08-0382P) that states that the 2004 Shooks Run LOMR "never became effective" because no public notice ever appeared in the Gazette or the Federal Register regarding the revisions. Federal law requires public notice twice in the local newspaper and in the Federal Register.
On 1/13/10, we initiated a Government Accountability Office/Department of Homeland Security investigation into the conflict of interest aspect of FEMA's receipt of money based on bad maps, and into predatory lenders taking advantage of those bad maps.
In a separate case, and under federal law, the flood zone conditions have reverted back to 1997. Two signed contracts stipulate the house is out of the flood zone under those conditions, and
Wachovia's lawyers stipulated that our house was outside the flood under those conditions. Wachovia has done a new "determination" that claims our house is still in a flood zone,
based on 2004 conditions (which never legally existed), but they have never made a determination based on the 1997 conditions that were actually in effect. Those warm, fuzzy TV ads that claim "We're With You When"http://www.youtube.com/watch?v=jGqT2ZplY2k&feature=PlayList&...
appear freakishly creepy to us now: Like, in this hellish, illogical morass you created, you're with us here, too? Prodding us with a pitchfork?
3/31/10 Update. FEMA released a flood revision in our neighborhood, which is unrelated to our earlier breach of contract suit, correcting the map that had been posted (the one that never went into effect). The revision lowers the flood zone by three feet, which not only moves the flood zone 35 feet further away from our house, but puts an additional seven houses out or nearly out (with a little work) in the neighborhood. The shocking irony is that this revision is based on the flood abatement work that was done in 2003.
The bigger problem and the bigger story is that during the last five years, our lender threatened foreclosure on our home some 30 times, and is still attempting to do so. They used the wrong map, one that never became effective, instead of the one that was, under federal law, under effect.
How many of our city's homeless experienced the same fiasco, but could not afford to spend the time and money disputing it?
4/15/10 Update. One of the houses in our neighborhood that is now out of the flood zone according to the new 3-foot-lower elevation (which should have gone into effect in 2004, according to the Chief of Engineering, Management Branch, Mitigation Directorate at FEMA) was foreclosed on by the bank. This is an extreme insult to everyone who thinks we live in a free country, when a mistake by FEMA can result in people losing everything they own. FEMA, the banks, and the insurance companies need to be held accountable.
7/26/10 Update. A letter from Allstate blames the dispute on a company called CoreLogic, which has made a determination that our house is in a flood zone (again using the map that never became effective), even though 16 pieces of documentation show that our house has always has been out of the flood zone.
Will FEMA, Wachovia, Allstate, or CoreLogic do what's right? In the mean time, we have included CoreLogic in the Department of Homeland Security/Government Accountability Office investigation.
8/24/10 Update. FEMA has finally "determined" officially in a Letter of Map Ammendment that our house is outside the flood zone. The bad news is that the flood abatement work the LOMA is based on was done in 2003, and since then Wachovia and FEMA have taken thousands of dollars from us for "flood insurance' based on the map which never went into effect. The Department of Homeland Security/GAO/FEMA investigation continues.
11/30/10 Update. The Department of Homeland Security/FEMA has directed Allstate and their underwriter to refund all five years of our "flood insurance" principal, and we have received a small, partial refund. In their letter to the underwriter, DHS flatly states that our house was never in a flood zone.
12/20/2010 Update. Today, FEMA and the Department of Homeland Security fully refunded all of the "flood insurance" money they received from Wachovia. The reason stated for the refund on the check stub is that it was an "incorrect zone". Who made their determination based on an incorrect zone? Wachovia. Now it's up to the Comptroller of Currency and the Government Accountability office to hold Wachovia's feet to the fire and levy a steep fine for improper banking practices and attempted felony grand larceny. Wachovia now owes us tens of thousands in interest, late payment fees, legal costs, and four years of mortgage overpayment.
6/14/2011 Update. Wells Fargo Fights Dirty and Takes Revenge. Neither the Comptroller of Currency nor the Department of Homeland Security/FEMA have made final determinations in the case. However, we found out from a realtor who knocked on our front door today that our house has been listed in default and in foreclosure on the El Paso County Public Trustee website. Wells Fargo thinks they can stealth foreclose as revenge for losing the flood insurance case. Today we contacted the Comptroller, FEMA's regional head, two U.S. congressmen, our new mortgage holder, the Trustee, a legal flood zone specialist, a law firm, and ABC news.
9/27/2011 Update. We opened a new case with the Comptroller on Wachovia's "foreclosure" claim and escrow dispute. Several "customer service" people at Wachovia admitted that since October of 2009, we have been overpaying our PITI (principal, interest, tax, and insurance) each month. Wachovia has also admitted that they made mistakes in our "escrow analysis", they have not been able to figure out where their yearly insurance total estimate comes from; it is much higher than the actual amount paid for insurance the last two years. When they filed for foreclosure, there was more than a full month's payment in escrow that should have been credited as a payment instead of languishing in escrow, and they have not been able to explain this. Bottom line, they made several accounting errors that resulted in their attempt to foreclose on our house, while our monthly payments were actually more than needed for PITI, and we never made any late or short payments. They think revenge is sweet, we think they deserve prison time.
We finally got a statement from Wachovia's lawyers for payoff and paid the full amount to get our house out of hock, but the payoff (including our lawyer's fees and independent audit) was eleven thousand dollars higher than the remaining principal on our mortgage. Since Wachovia accounting mistakes caused the foreclosure, we are requesting that the Comptroller recover this money from the bank.
Wachovia sent a cashier's check refund that is approximately the same figure they claimed we owed as delinquent payments, and stated in writing that the reasons are "escrow overage from your last analysis" and "surplus in your escrow account". This makes the Comptroller's case for us.
The original flood zone case is in the final appeals process with the Comptroller.
Will Wachovia/Wells Fargo make this right?