Roy Patch examines of one of the nearly dozen abandoned homes near Rozella Street. Floodwaters from Rocky Creek have become a fact of life for Mr. Patch. About every two to three years since 1990, Mr. Patch has seen the floodwaters rise from the creek. TODD BENNETT/STAFF

Flood's damages breach boundaries

Web posted August 7, 2000

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 Regulated banks
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By Heidi Coryell
Staff Writer

Roy Patch has lived in his Farris Road home for nearly 49 years. The 78-year-old has known he was living in a 100-year flood plain for about the past decade.

But the house is paid off, and he's retired.

If he bought flood insurance, the Federal Emergency Management Agency might consider buying his home in a few years. But he wouldn't sell it anyway.

``I've lived here this long,'' he said recently from his south Augusta home, which is located behind Regency Mall. ``Some of these houses, the government wants to buy them, but we're all retired. For what they give you, a retired person can barely afford to make a down payment today.

``I just try to keep it livable in here.''

Augusta's Emergency Management Agency is tracking flood damage throughout the county, including in Mr. Patch's neighborhood - the Hollywood subdivision - which is located almost entirely in the 100-year flood plain special flood hazard area. His home has a 1 percent chance of flooding in any given year.

Although federal agencies have been promoting flood plain awareness for more than 30 years, Mr. Patch and at least seven of his neighbors represent gaping holes that still exist in the system:

Those who inherit a home, home buyers who finance their purchase with private loans or who pay with cash, people who borrow money from lending institutions that are not federally regulated - these groups represent the majority of those living in flood plains without flood insurance.

In the Hollywood subdivision, many of the residents are retired. They've lived in the same homes for decades, before flood insurance was even a blip on the government's radar.

But based on local EMA records, the trend is not isolated to Mr. Patch's neighborhood. After flooding swept through the county June 20, the EMA began collecting data for mitigation purposes and also to determine who would be eligible for immediate relief assistance from a $105,000 grant through Gov. Roy Barnes.

From west Augusta's Commonwealth subdivision there were 23 reports of flooding filed. The data shows that nearly half of those reports were submitted by homeowners who do not have flood insurance. And more than 80 percent of the uninsured homes were located in the 100-year flood plain.

In Mr. Patch's subdivision, 100 percent of those who filed damage with the EMA owned homes uninsured against flood damage in the special flood hazard area.

And in the Chelsea Drive area, two of the four homeowners who applied for flood relief were touching the flood hazard area.

Fixing the flood act

For the past four years, federally regulated banks and mortgage companies have been under a federal mandate that says they must require borrowers securing loans on property in the special flood hazard area to also buy flood insurance. These lending agencies run the risk of being fined or even losing the right to issue federally backed loans if they are found to be in violation.

The Flood Disaster Protection Act has been around since 1973. But by the 1990s, the federal government became aware of gross oversights pertaining to the act nationwide.

Lenders weren't complying with the guidelines in place, and it was creating huge losses for those living in flood-prone areas. It also was beginning to become a drain on taxpayers, who were having to compensate with federal disaster relief money.

``A lot of lenders weren't doing what they were supposed to be doing, whether it was out of not knowing, or not caring,'' said Terri Turner, assistant zoning and development administrator for the county's planning and zoning commission.

In 1994, federal officials reformed the 21-year-old National Flood Insurance Act to include stiff financial penalties for lenders found violating the act.

``(Congress) said, `You will check it; it's your responsibility; and we could - as a penalty - pull your ability to write federally-backed mortgages,'ƒ'' Ms. Turner said.

Federal regulatory reports indicate that banks and mortgage companies have been following the flood insurance act guidelines.

But regardless of the provisions in place today, officials say there simply has not been enough time to fully implement the safeguards.

When Hurricane Earl flooded the area in 1998, Mr. Patch and his wife escaped their neighborhood in an ATV. FILE/TODD BENNETT/STAFF

``There are a lot of situations where people are finding lenders didn't tell them the needed insurance (prior to the act), but it would only come to light in a situation like you have in Augusta,'' said Collis Brown, state coordinator for the national flood insurance program. ``The act essentially went back to enforce lenders to require flood insurance on those structures that are in the identified flood plain, as shown on FEMA flood maps.''

Financial penalties associated with the reformed legislation push lenders to encourage customers to buy insurance before they need it. The first compliance studies were conducted in 1997, and the most recent report was issued in 1999. Future examinations are set to take place every two years.

If a lending institution is found violating the flood insurance act, its federal regulatory agency can issue a civil penalty against the lender of up to $350 per violation, not to exceed $100,000 in a year.

Falling through cracks

Dominion Way homeowners Jim and Pam Huckaby say they were not required to purchase flood insurance when they secured their loan from Banker's First, now SouthTrust Bank, in 1994, even though their property is in the Crane Creek flood plain.

But in 1998, heavy rains flooded their home for the first time since they had moved in. To repair the damage, they took out a loan against their mortgage, which had since been bought out by another bank.

But before they could borrow money against their mortgage, the Huckabys were told they had to buy flood insurance.

``They wouldn't have said anything if I hadn't gotten flooded out in '98,'' Mr. Huckaby said. ``That house belongs to the bank. I mean, you figure they'd worry about their investment.''

The scenario is a common one, officials say. It shows that the reform act is working, but it often catches homeowners off guard.

``You fall through the cracks, and then you're the person who gets burned,'' Mr. Huckaby said.

The federal regulatory agencies that examine member banks include the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, Federal Deposit Insurance Corp., Office of Thrift Supervision, Farm Credit and National Credit Union administrations, as well as government sponsored enterprises Freddie Mac and Fannie Mae.

Catching up

Even though oversight for the reform act began as early as 1996, the first fines for violating the regulation weren't levied until last year against Banco Popular de Puerto Rico in San Juan, Puerto Rico.

``They have to establish that there's a pattern of noncompliance,'' said Lena Thompson, lending liaison for FEMA. ``(FEMA) is here to interpret and help (federal regulators) make sure the law is enforced.''

And most of the complaints received by FEMA are from consumers objecting to suddenly being required to purchase flood insurance for a home they have been living in for years.

Homeowners may not become aware of the updated regulation until they try - like the Huckabys - to refinance a mortgage.

``Flood insurance is a hard sell,'' Ms. Thompson said. ``They just don't think it's going to happen to them. Most complaints come from individuals who don't understand why the bank is requiring them to have this insurance.''

If a borrower refuses to purchase flood insurance, the lender has the right to buy it for them, and then tack the cost onto the loan payments.

To magnify the problem locally, up until two years ago, there was no state provision in Georgia requiring surveyors to indicate a structure's location in the flood plain.

In 1998, the county passed a local ordinance that requires every plat to disclose the structure's location in the flood plain. But it will take years to update every plat, and until then, oversights are still likely to happen.

After her mother died two years ago, Cathy Conner took over the mortgage on the Commonwealth subdivision patio home. The entire process was just a legal matter of transferring her name onto the deed.

``I looked her papers over with a fine-toothed comb,'' Mrs. Conner said. ``They didn't say anything like, you have to have flood insurance.''

If they had, she surely would have bought it to avoid her current situation, which includes repair costs to her home that exceed what she's owes on the mortgage.

Her family has been staying with church friends for weeks, unsure what the next step might be.

``It's going to cost me more than what I owe on it just to make is livable,'' Mrs. Conner said. ``I don't know what we're going to do.''

Regulated banks

The Flood Reform Act of 1994 requires lending institutions to notify purchasers or lessees if the property they're securing a loan for is located in a special flood hazard area. The following local banks are members of the Georgia Bankers Association and are federally regulated:

Augusta Industrial Federal Credit Union, 2338 Lumpkin Road

Augusta Seaboard System Federal Credit Union, 3636 Wheeler Road

Augusta V.A.H. Federal Credit Union, 1 Freedom Way

Bank of America, seven Augusta-area locations

Bankers First Corp. and Bankers First Savings Bank (both changed their title to SouthTrust Bank of Georgia in 1996)

CSRA Federal Credit Union, 3749 Wheeler Road

First Bank of Georgia, 2805 Wrightsboro Road

First Union Direct Bank, 699 Broad St.

First Union National Bank, six locations throughout Augusta

Fort Gordon Federal Credit Union, 2964 Old Highway 1 and Fort Gordon

Georgia Bank & Trust Co. of Augusta, 3530 Wheeler Road, five additional locations throughout Augusta

Georgia Power Federal Credit Union, 2103 North Leg Road

Health Center Credit Union, Medical College of Georgia, three additional locations throughout Augusta

King Mill Savings & Credit Association, 1701 Goodrich St.

Metro One Federal Credit Union, 2237 Old Savannah Road

Premier Bank, 2743 Perimter Parkway

Regions Bank, five locations throughout Augusta

Savannah River Plant Federal Credit Union, 3120 Peach Orchard Road

SouthTrust Bank, 10 locations throughout Augusta

SunTrust Bank, seven locations throughout Augusta (Trust Co. Bank of Augusta changed its title to SunTrust Bank in October 1995)

University Health Federal Credit Union, 1350 Walton Way

Wachovia Bank, three locations throughout Augusta

Regulating bodies

Banks with the word ``nation'' or ``N.A.'' in their titles are regulated by the Office of the Comptroller of the Currency. For complaints regarding these institutions, contact:

Office of the Comptroller of the Currency

Customer Assistance Group

Suite 3710

Houston, TX 77010

(800) 613-6743

Savings banks and savings and loans are identified by the word ``federal,'' ``F.S.B.'' or ``F.A.'' in their titles and are regulated by the Office of Thrift Supervision. For complaints regarding these institutions, contact:

Office of Thrift Supervision

P.O. Box 105217

Atlanta, GA 30348-5217

(404) 888-0771

Consumer Affairs Office

1700 G. St. N.W.

Washington, DC 20552

(800) 842-6929

Credit unions with the word ``federal'' in their titles most often are regulated by the National Credit Union Administration. For complaints, contact:

National Credit Union Administration

Atlanta Regional Office

7000 Central Parkway

Suite 1600

Atlanta, GA 30328

(770) 396-4042

For finance companies or consumer loans not regulated by the above agencies, the Federal Trade Commission enforces truth in lending regulations. Send complaints or questions to:

Federal Trade Commission

CRC-240

Washington, DC 20580

(877) 382-4357

Reach Heidi Coryell at (706) 823-3215.