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#1575636 - 07/08/11 05:02 PM
Flood Notice 10 days prior to closing
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New Poster
Joined: Jul 2011
Posts: 22
Illinois/Indiana
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We are being cited by an external auditor for those rare occasions where the Borrower Notification is not signed 10 days prior to closing. I found a Q&A in the InfoVault about this topic dated 03/14/11 for which Randy Carey and Kathleen Blanchard responded that the 10 day requirement had gone away. Can someone point me to a citation or reference for that change? Thanks for your help!
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#1575682 - 07/08/11 05:43 PM
Re: Flood Notice 10 days prior to closing
tlevandoski
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10K Club
Joined: Aug 2002
Posts: 47,517
Bloomington, IN
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Page 34 of the Mandatory Purchase of Flood Insurance Guidelines - you will notice the 10 day reference is no longer there. Also refer to the center column on page 35930 of the FAQs http://edocket.access.gpo.gov/2009/pdf/E9-17129.pdf
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The opinions expressed are mine and they are not to be taken as legal advice.
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#1576283 - 07/11/11 06:20 PM
Re: Flood Notice 10 days prior to closing
tlevandoski
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10K Club
Joined: Nov 2000
Posts: 18,762
Central City, NE
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Dan is correct, however, there's a twist. Here's some info on the Flood webinar I taught on 6/23/11 concerning the timing of the Notice:
1. Prior to Closing: Must be delivered to the borrower(s) and to the servicer if applicable, within a “reasonable time”, before the completion of the loan. [§339.9(c)]
2. Reasonable Time: The regulations do not establish a fixed time period in which a lender must provide the notice. What constitutes a reasonable time will necessarily vary according to the circumstances of the particular transaction. [MPFIG – page 34 and Federal Register /Vol. 74, No 138 – page 35930]
3. Regulatory Guidance: The Agencies generally continue to regard ten days as a “reasonable” time interval. [Federal Register /Vol. 74, No 138 – page 35930]
So, although the reference to 10 days was removed from the regulation and the MPFIG, the Federal Register still makes this comment. Ticks me off!
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#1576348 - 07/11/11 07:25 PM
Re: Flood Notice 10 days prior to closing
David Dickinson
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10K Club
Joined: Aug 2002
Posts: 47,517
Bloomington, IN
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The Agencies generally continue to regard ten days as a “reasonable” time interval. [Federal Register /Vol. 74, No 138 – page 35930] Hmmm.....I skipped right over that little tidbit. However, I still rely on your first cite. There are many times we can close an in-house, HELOC or HE loan within 10 days and we will not make the customer wait simply because we have to furnish them the notice.
_________________________
The opinions expressed are mine and they are not to be taken as legal advice.
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#1576400 - 07/11/11 08:33 PM
Re: Flood Notice 10 days prior to closing
Dan Persfull
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10K Club
Joined: Jul 2001
Posts: 83,227
Galveston, TX
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The reality of the matter is, if you give them the notice and they produce a flood insurance policy and then you close, how could any timing be deemed unreasonable?????
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The opinions expressed here should not be construed to be those of my employer: PPDocs.com
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#1578374 - 07/14/11 09:52 PM
Re: Flood Notice 10 days prior to closing
David Dickinson
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Diamond Poster
Joined: Dec 2008
Posts: 1,268
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Now this is a worry. In a recent review I ran across two notices signed @ closing. David, where in the law does it say you cannot provide the notice @ closing. I'm aware of the reasonable time=10 days etc. but please point me to where it says @ closing is a violation. By the way, one determination was dated two weeks prior to the customer's notice signature/date. And it was in a flood zone and there was adequate insurance dated with the closing date.
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#1578428 - 07/15/11 06:27 AM
Re: Flood Notice 10 days prior to closing
Combustible
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10K Club
Joined: Jul 2001
Posts: 83,227
Galveston, TX
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Where does it say that - nowhere. But I can verify that David is correct as I have seen banks cited for just this situation.
If you had the notice in your hand two weeks ago, why was it not delivered to the customer. Was it ever delivered to the customer prior to closing or did the loan officer just call them up and say: "hey, we need flood insurance on this propoerty"? Signing at closing is not delivering the notice in a reasonable manner.
_________________________
The opinions expressed here should not be construed to be those of my employer: PPDocs.com
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#1578499 - 07/15/11 01:37 PM
Re: Flood Notice 10 days prior to closing
Kathleen O. Blanchard
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Diamond Poster
Joined: Dec 2008
Posts: 1,268
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Believe me, I am the choir on this one. My point is (and I know you are aware), when we go into an exit, and we don't have exact language in the law to back up our exception, then a full blown discussion breaks out and we (compliance)appear to not know what we're talking about. This affects our credibility as corporate internal auditors and all future exams. I was hoping I'd overlooked the "@ closing" verbiage. Plus, I've not seen this in any of the CMP citings, so you can understand my position I'm sure. Thanks and I appreciate all of your help and knowledge!
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#1578527 - 07/15/11 02:01 PM
Re: Flood Notice 10 days prior to closing
Combustible
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10K Club
Joined: Aug 2002
Posts: 47,517
Bloomington, IN
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339.9
(b) Contents of notice. The written notice must include the following information:
(c) Timing of notice. The bank shall provide the notice required by paragraph (a) of this section to the borrower within a reasonable time before the completion of the transaction, and to the servicer as promptly as practicable after the bank provides notice to the borrower and in any event no later than the time the bank provides other similar notices to the servicer concerning hazard insurance and taxes. Notice to the servicer may be made electronically or may take the form of a copy of the notice to the borrower.
Providing the written notice at closing (completion) does not meet the above timing requirements.
_________________________
The opinions expressed are mine and they are not to be taken as legal advice.
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#1578545 - 07/15/11 02:20 PM
Re: Flood Notice 10 days prior to closing
Dan Persfull
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Diamond Poster
Joined: Dec 2008
Posts: 1,268
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Thank you Dan. Technically, if the brwr signs the notice before they sign the note (which will be their argument) would that be in agreement with the law?
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#1578579 - 07/15/11 02:43 PM
Re: Flood Notice 10 days prior to closing
Combustible
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10K Club
Joined: Aug 2002
Posts: 47,517
Bloomington, IN
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How is providing the require written notice the day of closing providing it within a reasonable time?
IMO it would not be in agreement with the law. From page 55 of the Mandatory Purchase Guidelines:
The 1994 Reform Act requires lenders and servicers to develop policies and procedures to ensure that flood insurance coverage is obtained before a loan can be granted, when a determination has been made that a building securing a loan is located in an SFHA.
If you are not providing the written notice until closing then IMO your management has failed miserably to comply with the flood insurance requirements and will deserve any and all CMPs levied.
_________________________
The opinions expressed are mine and they are not to be taken as legal advice.
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#1581856 - 07/22/11 04:40 PM
Re: Flood Notice 10 days prior to closing
David Dickinson
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Diamond Poster
Joined: Jun 2001
Posts: 1,373
Lido Deck
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Just curious about something. Has anyone ever been criticized for obtaining the SFHDF on the day of closing? (It was negative so a notice was not required.)
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--A bad day at sea is better than a good day at work.
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#1581893 - 07/22/11 04:59 PM
Re: Flood Notice 10 days prior to closing
Kathleen O. Blanchard
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Power Poster
Joined: Apr 2005
Posts: 3,663
TN
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But you could counter that if it had come back in as a positive hit, that you would have cancelled and rescheduled the closing until flood insurance was provided. Not saying you will win the argument, but it is a counter defense if you have any criticism.
_________________________
I can't herd the cats anymore, so I just set up the electric fences and let them fry when they stray out of bounds.
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#1582216 - 07/22/11 09:24 PM
Re: Flood Notice 10 days prior to closing
Kathleen O. Blanchard
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Diamond Poster
Joined: Jun 2001
Posts: 1,373
Lido Deck
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I agree 100%. But, I'm getting push back from a particular department about this. Guess which one...
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--A bad day at sea is better than a good day at work.
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#1582234 - 07/22/11 09:39 PM
Re: Flood Notice 10 days prior to closing
Rubaiyat
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10K Club
Joined: Aug 2002
Posts: 47,517
Bloomington, IN
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Page 34 of the Mandatory Purchase Guidelines
A lender also must complete the SFHDF (see Appendix 3, Standard Flood Hazard Determination Form) prior to concluding loan processing.
Once you go to closing processing has been completed. Unless you are processing a loan and closing the same day then you have potential problems waiting until closing to get the determination.
_________________________
The opinions expressed are mine and they are not to be taken as legal advice.
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