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Message from Jim

Since it is not uncommon for a land surveyor to be requested to perform a Class D survey, plot survey, or mortgage survey to construct a fence, build an addition, or to gain municipal approval for a permit, we decided that republishing our thoughts pertaining to the purpose and misuse of a mortgage loan inspection is always timely.

Locally, it is called a mortgage loan inspection, so the word “survey” when describing this product should be avoided. As well, the term “Class D” has no relevance in the mortgage loan inspection process, and should not be used. Simply using the proper terminology could help eliminate confusion with this product. Unfortunately, even with the large list of qualifications stated on a mortgage loan inspection, many continue to use it as a land survey regardless of its deficiencies because it may be viewed as a quicker, cheaper alternative to a formal survey. That is a very risky perception. Cost or time constraints should never justify the use of this product for anything other than mortgage loan risk evaluation. The only purpose is to evaluate apparent municipal setback compliance and perceived horizontal flood risk for the investor holding the mortgage note.

We always take extra time to educate our clients and the public on the proper use of these products to avoid liability on our own behalf, but also to protect those who have been misguided.

Here is our top ten list of appropriate mortgage loan inspection qualifications which should be strongly considered:

▪ A mortgage loan inspection can be deficient of applicable appurtenances such as out sales, rights of way, easements, licenses, boundary line agreements, encroachments, conflicts with abutter’s deeds, wetlands, non-conforming land divisions, subdivision, appropriate access, original called-for evidence, junior/senior rights, or sequence of conveyance in relation to abutting tracts of land. This is not an exclusive list, but is intended to convey the extreme deficiency of a mortgage loan inspection when compared to a higher level land surveying product. Historical research must occur to identify or properly distribute excess and deficiencies in record documents, address typographical errors, or obtain other applicable information pertaining to a surveyed parcel.
▪ Even if a municipality accepts a mortgage loan inspection for permitting or approval, the sketch does not become an official survey. Several municipalities actually acknowledge a “Class D survey” in their ordinance as an acceptable document, which can confuse the homeowner and increase liability for the land surveyor.
▪ Just because a licensed Professional Land Surveyor performs this service and stamps the inspection, it does not magically make it a land survey.
▪ The purpose of a mortgage loan inspection is to evaluate risk for collateral secured by the loan created and should only be used by the lender, underwriter, and investor for setback compliance and flood risk evaluation.
▪ A real estate closing statement calls this product a "survey" for lending purposes, but it is typically only a mortgage loan inspection.
▪ By mere definition, the term “inspection” does not include the word “measure”, so to assume that boundary lines shown are correct, and that on-site improvements have been accurately located to apparent lines is extremely risky.

▪ When a land surveyor depicts apparent boundary corners on the inspection sketch, he/she is not certifying that the marker indicated is the actual corner. Unfortunately, the level of detail shown on an inspection sketch (apparent boundary evidence, fences, markers, etc.) can give the perception that a boundary survey was performed, leading many to assume the relationship of depicted improvements to boundary lines is correct. For this reason, it is our policy not to show any information collected for setback compliance on the sketch.
▪ Homeowners/buyers, contractors, design professionals, municipal staff, code officers, real estate licensees, and even a lender or title company who attempts to use a mortgage loan inspection for anything other than its sole purpose is doing so at their own risk and the risk of the clients they represent.
▪ Regardless of the product provided, title or ownership is never determined by a land surveyor.
▪ The purpose and outcome of a mortgage loan inspection does not change whether performed with a survey instrument or a measuring tape, or whether it is drawn to scale or not.

As business owners, we work closely with clients to meet their needs, but as licensed Professional Land Surveyors, we do not have the luxury of eliminating essential services due to their budget, especially when it comes to preparing plans to be used by multiple parties for design, construction, or conveyance. It is our duty to educate the public about the wide range of survey products available, and guide clients on what they can expect to receive, but more importantly, what they wont receive from those products. Communicating proper use is a good first step to creating the higher level of technical standard needed to enhance public safety, reduce liability, and minimize disputes.

Click here for further explanation of a mortgage loan inspection as prepared by the Maine Society of Land Surveyors, in their pamphlet entitled "Questions and Answers about Mortgage Loan Inspections". Additional information is also provided on Question 24 of the Maine Association of REALTORS, “Residential Property Transaction Booklet”.

Remember, whether paper, digital, or interactive, Flood Insurance Rate Maps only depict perceived flood risk, given the best available data at the time. Actual flood risk changes, and maps become outdated.

Resources

Where to find DFIRMs

The new Digital Flood Insurance Rate Maps are now in effect for the Maine Counties of Waldo (as of 7-6-2015), Sagadahoc, and Lincoln (both as of 7-16-2015), joining Androscoggin, Kennebec, and Oxford. These are final regulatory products and reflect the most current data to be used for insurance rating and floodplain regulation.

To check the effective dates of regulatory products for your community, go to the Product Availability page on FEMA's Map Service Center. Select your county to view all available products, including effective FIRM panels for each community.

If you have a particular address to look up, the address search bar on the home page of the Map Service Center is the easiest way to determine the correct panel number. For counties and communities that have DFIRMs available, a new featured called the "Interactive Map" will take you directly to FEMA's National Flood Hazard Layer, a GIS platform which provides a base map and various overlays such as topography and street maps.

Want more information on DFIRMs? Click here to view a pdf of FEMA's Technical Fact Sheet "Using a Digital Flood Insurance Rate Map" from the Home Builder's Guide to Coastal Construction, 2010.

Flood Insurance Issues

The Insurance Information Institute, an organization dedicated to "improving public understanding of insurance", recently released a comprehensive summary of the NFIP's background, reforms and new developments, statistics, and an interesting section on flood insurance in other countries. Check out "Flood Insurance Issues".

FEMA disaster mitigation specialists explain that a mudflow is a river of liquid mud similar in consistency to a milkshake. Mudslides, on the other hand, are more solid and more closely resemble a cake. (FEMA News Release No. 1523-026, 2004) Photo: 2014 winter storm brought epic mudflows to an area in southern California where vegetation was previously damaged by fire. (Jonathan Alcorn, Reuters).

Flood Fact:

Damage from mudflows is covered by flood insurance

The combination of recent fires and extreme rainfall in California has resulted in severe damage to many communities. Common in these drought-ridden areas are flash floods, mudflow, and landslides.

What is a mudflow and how is it different from a mudslide? While "mudflow" and "mudslide" are sometimes used interchangeably, the National Flood Insurance Program makes a clear distinction when it comes to insurance coverage.

Per FloodSmart.gov:
A mudflow is a "river of liquid and flowing mud on the surface of normally dry land, often caused by a combination of brush loss and subsequent heavy rains. Mudflows can develop when water saturates the ground, such as from rapid snowmelt or heavy or long periods of rainfall, causing a thick liquid downhill flow of earth.

Mudflows are different from other earth movements, such as landslides, slope failures, and even moving saturated soil masses in which masses of earth, rock, or debris move down a slope where there is not a flowing characteristic." Damage from land slides and earth movements is not covered by flood insurance. If a mudslide is characterized exactly as a mudflow is described by the NFIP, it could be covered.

In the News

The Wharton Center for Risk Management and Decision Processes at the University of Pennsylvania, has recently released the findings of several interesting studies on the topics of flood risk perception. One of articles discusses "moral hazard", a term which generally describes a situation in which one partakes in risky behavior because someone else bears the burdens of those risks. Sound familiar? Moral hazard typically arises from a lack of information about the actual risks involved in a situation, and an imbalance in incentives.

Check out this briefing from the Wharton Center to see how moral hazard relates to flood risk perception and insurance: "Does Federal Disaster Assistance Reduce the Demand for Insurance Protection?"

Another interesting brief from the Wharton Center, "Seeing is Believing? Property Prices in Inundated Areas" discusses the impact of perceived risk on property values as distinguished by the "information effect" vs the "inundation effect". Information refers to having knowledge of flood risk i.e. through flood hazard maps, while inundation is having experienced an actual flooding event.