A new GAO report highlights significant gaps in flood insurance coverage across the United States and raises important questions about property-level risk assessment, mortgage lending practices, and the future of flood insurance requirements.
Flood risk is an increasingly important consideration for financial institutions, mortgage lenders, real estate investors, and anyone with significant exposure to residential or commercial real estate.
A newly released report from the U.S. Government Accountability Office (GAO), Flood Insurance: Congressional Action Could Help Increase Coverage for At-Risk Properties (GAO-27-108012), published October 1, 2026, brings renewed attention to the limitations of current flood risk identification and flood insurance practices.
The report identifies a substantial number of properties with elevated flood risk that are not currently covered by flood insurance. It also outlines several potential legislative changes that could affect mortgage lending, insurance purchasing decisions, and the availability of property-level flood risk information.
For lenders and investors, the findings deserve attention.
The Numbers Behind the Report
The GAO report presents several noteworthy findings:
Approximately 86% of properties identified as high-risk for flooding did not have National Flood Insurance Program (NFIP) coverage as of April 2026.
Approximately 13 million high-risk properties are located outside FEMA-designated Special Flood Hazard Areas.
The number of NFIP policies declined from approximately 5.5 million in 2010 to 4.5 million in 2026.
Private flood insurance has grown in importance, accounting for approximately 14% of all flood insurance policies in 2025.
These findings illustrate a growing disconnect between traditional flood insurance requirements and the broader universe of properties exposed to flooding.
Under current federal law, property owners with federally backed mortgages generally must carry flood insurance when their properties are located within designated Special Flood Hazard Areas.
However, FEMA flood maps do not capture every source of flood risk. The GAO specifically identifies heavy rainfall, or pluvial flooding, as an important source of risk that may not be adequately reflected in existing flood map designations.
For lenders and investors, this raises an important consideration: regulatory flood zone status and actual property flood exposure are not necessarily the same thing.
Four Potential Changes That Could Affect the Lending and Real Estate Industries
The GAO recommends that Congress consider four actions that could influence future flood insurance practices.
1. Broader Flood Risk Criteria for Mandatory Insurance Requirements
The GAO recommends that Congress consider updating the criteria used to determine mandatory flood insurance requirements to account for all sources of flood risk, including heavy rainfall.
If adopted, this could expand the number of properties subject to mandatory flood insurance requirements.
For mortgage lenders and servicers, broader criteria could eventually mean additional properties requiring flood zone review, insurance verification, and ongoing compliance monitoring.
For investors, this could influence insurance costs and property-level operating expenses.
2. Greater Availability of Property-Level Flood Risk Information
The GAO also recommends that Congress consider directing FEMA to collect and make property-level flood risk information publicly available.
More detailed property-level information could provide lenders, investors, and consumers with additional insight into potential flood exposure.
Access to more comprehensive information could also influence property valuation, insurance purchasing decisions, portfolio risk assessments, and investment strategies.
3. Flood Insurance Quotes Before Mortgage Closing
Another recommendation focuses directly on mortgage lending practices.
The GAO suggests that Congress consider requiring lenders originating federally backed mortgages to ensure that homebuyers receive a flood insurance quote before closing.
The recommendation also includes obtaining a signed risk disclosure when a buyer declines voluntary flood insurance coverage.
If implemented, this could create additional steps in the mortgage origination and closing process, even for properties that are not currently subject to mandatory flood insurance requirements.
For mortgage professionals, this is an area worth monitoring as potential changes could affect closing procedures and borrower communications.
4. Higher National Flood Insurance Program Coverage Limits
Finally, the GAO recommends that Congress consider increasing NFIP coverage limits and establishing a mechanism for adjusting those limits periodically.
This recommendation recognizes that existing coverage limits may not always align with the potential financial losses associated with flooding.
For property owners and investors, changes in coverage limits could influence insurance planning and the evaluation of potential financial exposure.
Why These Findings Matter to Real Estate Investors
For real estate investors, flood risk is not simply an insurance compliance issue. It is also a property-level financial consideration.
A property outside a FEMA-designated Special Flood Hazard Area may not require mandatory flood insurance under current federal requirements, but it may still face exposure to flooding.
That exposure can have implications for:
Property acquisition and investment due diligence.
Insurance availability, premiums, and coverage decisions.
Property operating expenses and long-term ownership costs.
Potential repair expenses and business interruption.
Portfolio concentration and geographic risk exposure.
Property marketability and future resale considerations.
The availability of more comprehensive property-level flood risk information could become increasingly valuable when evaluating potential acquisitions and existing real estate portfolios.
What Should Mortgage and Financial Professionals Do Now?
It is important to distinguish between the GAO's recommendations and existing regulatory requirements. The report does not mean that all properties outside FEMA-designated flood zones are now subject to mandatory flood insurance requirements, nor does it establish new lender obligations.
The recommendations are matters for congressional consideration.
Nevertheless, lenders, mortgage professionals, and investors may benefit from taking a closer look at how flood risk is evaluated throughout the property lifecycle.
Some practical considerations include:
Reviewing existing flood determination and property research procedures.
Recognizing the limitations of FEMA flood zone designations when evaluating broader flood exposure.
Encouraging borrowers and property owners to understand voluntary flood insurance options.
Considering additional property-level research as part of investment and portfolio due diligence.
Monitoring legislative and regulatory developments that could affect future lending and insurance requirements.
Proactive awareness can help organizations better understand potential exposure and prepare for an evolving flood risk landscape.
The Importance of Reliable Property Research
At Western Technologies Group (WTG), we recognize that accurate and timely property information plays an important role in real estate transactions, mortgage lending, and investment decisions.
Flood determinations and other property research services help industry professionals identify important information about properties and support their due diligence and compliance processes.
As the conversation surrounding flood risk continues to evolve, the distinction between a property's FEMA flood zone designation and its broader flood exposure will remain an important consideration.
The latest GAO report makes one thing clear: traditional flood zone designations do not necessarily capture the full picture of flood risk across the United States.
For lenders, mortgage professionals, and investors, staying informed and incorporating appropriate property research into decision-making processes can be an important step toward better understanding and managing that exposure.
Read the original GAO report:
Western Technologies Group provides property research services designed to support the needs of lenders, mortgage professionals, real estate investors, and other industry participants.
The information provided is for informative purposes only and is not intended to be legal advice or a legal opinion. For legal advice, please consult an attorney.
