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#1903049 - 03/06/14 09:29 PM Flood Determination expiration
JPeterson Offline
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There is someone in my office that insists that a flood determination is only good for 7 years. We are pulling flood determinations for life of loan. IF we would have a 15 year commercial loan on the books, we would not have to pull a flood determination after 7 years right, assuming nothing with the loan changes. Where can I find this in writing?

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Flood Compliance
#1903052 - 03/06/14 09:36 PM Re: Flood Determination expiration JPeterson
manimal Offline
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From the Federal Reserve Exam Manual:

Reliance on Prior Determination
When determining whether flood insurance is required, an institution may consider the conclusions from a previous flood hazard area determination if both of the following conditions are met:

• The previous determination is not more than seven years old.
• The basis for that determination was recorded on the SFHDF mandated by the Reform Act.

An institution may not rely on a previous determination in two situations:

• If FEMA’s map revisions or updates show that the security property is now located in an SFHA
• If the lender contacts FEMA and learns that map revisions or updates affecting the security property have been made since the date of the previous determination

An institution may not rely on a previous determination set forth on an SFHDF when it makes a loan—only when it increases, extends, renews, or purchases a loan. Subsequent transactions by the same institution with respect to the same property, such as assumptions, refinancings, and second-lien loans, are to be treated as loan renewals. In those limited circumstances, a new determination is not required, assuming that the other requirements are met.

http://www.federalreserve.gov/boarddocs/supmanual/cch/flood.pdf

However, you are NOT required to pull flood to monitor your portfolio... so if the loan is out there for 15 years, you can rely on the LOL. But, if you increase, renew, or extend that loan, then the above rules apply.
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#1903360 - 03/07/14 05:28 PM Re: Flood Determination expiration JPeterson
SueInReview Offline
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I am a little confused when you say ... "a new determination is not required, assuming that the other requirements are met." By other requirements you are not referring to "previous determination is not more than seven years old", are you?

If I have a 15-year loan that renews at years 5 and 10 and nothing changes expect the interest rate, I do not need to obtain a subsequent flood determination, correct? The original life of loan determination is valid at both the 5 AND the 10-year renewal. Correct?

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#1903362 - 03/07/14 05:32 PM Re: Flood Determination expiration JPeterson
Skittles Offline
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TN
Sue -

If you make, increase, renew or extend a loan secured by improved property and the flood determination is over seven years old then a new determination must be obtained prior to origination. Life of loan is a totally separate issue.
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#1903373 - 03/07/14 05:46 PM Re: Flood Determination expiration JPeterson
manimal Offline
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Skittles is right.

The reg says this: when you make, increase, renew, or extend a loan, you need to determine if flood insurance is needed (order a flood cert).

If you are increasing, renewing, or extending, you can use a former flood as long as it's less than 7 years old and is on a SFHDF. Making a new loan always means you need to order a new flood cert.

The LOL is just a service provided by your flood vendor, it has no bearing on the flood regulation requirements.

Does that help make things clearer?
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#1903374 - 03/07/14 05:46 PM Re: Flood Determination expiration JPeterson
rlcarey Offline
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If I have a 15-year loan that renews at years 5 and 10.

That is a oxymoron. You either have a 5 year loan on a 15 year amortization that you may renew every 5 years or you have a 15 year loan in which the interest rate adjusts every five years. You cannot have both.
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#1904342 - 03/11/14 08:29 PM Re: Flood Determination expiration SueInReview
SueInReview Offline
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Correction: 15-year amortization...

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#1904358 - 03/11/14 08:53 PM Re: Flood Determination expiration JPeterson
rlcarey Offline
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Galveston, TX
A determination is only needed when you MIRE a loan. If you don't do anything on a loan for 15 years, you have no obligation to look at flood again after origination unless they are originally in a SFHA. In that case, you have to monitor for flood insurance.
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#1904546 - 03/12/14 04:25 PM Re: Flood Determination expiration JPeterson
scb2011 Offline
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TN
Our flood determinations are life of loan, and if the loan pays off and a new loan is made to the same borrower on the same property, our flood company will do a re-certification for free and we update them with the new note #. It is my understanding that as long as the re-cert date is current, that it does suffice as an updated determination. Is that correct, or would a completely new one need to be obtained?

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#1904550 - 03/12/14 04:27 PM Re: Flood Determination expiration JPeterson
rlcarey Offline
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Galveston, TX
A re-certified determination is no different than a new determination. It would be good for seven years. Life of loan coverage means nothing when it comes to the validity of determinations.
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