If we are performing a modification due to a hardship, loss mitigation workout, are we required to pull a new flood certificate for previous non-flood zone properties?

For example: the flood cert in the file is dated Sept of 2007 so it is not more than 7 years.

The tripwires for flood are MIRE: make, increase, renew, or extend. If you trip any of those as part of your modification, you will need to comply with the flood requirements.

For example: the flood cert in the file is dated Sept of 2007 so it is not more than 7 years.

The existing certification is fine as long as you document that the map it was based on is still in effect.

Thanks. We will pull a new flood cert on these.

That being said, you must still provide the notice (as stupid as that requirement is).

Al

I think they indicated these are previous non-flood zone properties

Is there ever a circumstance where we are allowed to use a flood determination that is older than 7 years? We have LOL coverage and we have a dispute in our office of whether or not we need to pull a new flood determination on a loan modification when the existing determination is older than 7 years. I say we do, others say no.....

Is there ever a circumstance where we are allowed to use a flood determination that is older than 7 years?

No. You will not find mention of life of loan coverage in any regulation. It has no real meaning accept from a safety and soundness perspective and if notified of a property change into a flood zone, it is a trigger for customer notification and force placement.

I thank you for your help!

My opposition's stance is that because we are simply extending the loan and no new loan number is given, we do not need to get a new determination no matter how old it is. And if there was a change in the map we would be notified.

I go back to anytime we Modify, Increase, Renew, Extend.... I can't find anything that says anything about whether or not a new number is issued.

Oops! Sorry! I meant "MAKE, increase, renew, extend..... Been a long day already.

Don't rely on "If there was a change in the map we would be notified". We had several instances where we would MIRE a loan, order an updated determination and find that the flood zone had changed since the last order. The company we WERE using failed to notify us, or the notice never made it's way to the appropriate employee at the bank. But, we have had this happen SEVERAL times.

Also, you are required to have a determination in file based on the latest flood map. If the flood map changes and the zone does not, your flood determination company does not notify you and you would have a $2,000 violation.

Trinia: A couple of extra comments on this topic:
1. I've never understood why the "7 year rule" exists, but it does.
2. Life of loan monitoring is not a requirement, is not mentioned in the regulation and is simply a service that evolved from the law back in 1996. You have to ignore the "our vendor will notify us if there's a map change" when thinking about the regulatory requirements. It's common sense, but doesn't figure into the rules.
3. Flood vendors will let you know if your collateral is affected by a map change, but they won't let you know if the map changes and it doesn't affect your collateral. For instance, if your property is moved from zone B to zone A, you'll get notified. But if the map is updated and it doesn't affect your property (zone B for the old and new map), then the vendor doesn't notify you. If you were to use the old SFHDF (within 7 years) for a new loan, the map date would be incorrect. This would be a violation.
4. Whether you have a new loan # or are using the same loan # is not a factor in this rule. If you MIRE a covered loan, how you number it is up to you but of no consequence to the regulatory requirements.

Please advise as there is a debate going on here now.

Scenario: We extended a loan's maturity (loan was not and is not in a flood zone). The prior determination was less than 7 yrs old at time of extension of maturity. We have LOL monitoring and I have seen that we do get notified of map changes via the LOL reports, even if the flood zone has not changed. In the current processes, nothing else is done with that information (map change but no actual flood zone change).

At the time of the extension, the prior determination was relied on without verifying that the map was not updated.

Management's argument against having to see if the map changed is that if it moved into a flood zone, the Bank would be notified by our LOL vendor, therefore, checking if the map had changed is not required. In addition, the argument is the LOL vendor does show on monthly reports if the map was updated regardless of flood zone change.

My argument is you cannot rely on the prior determination if the map changed, regardless if the flood zone did not change. Therefore, to determine if you can rely on the prior determination, you would have to see if the map was updated. If no, then you can rely on the prior determination. If the map was updated, you need to document a new determination.

We all know some of the flood rules are silly (like providding a new flood notice when increases, extending, or renewing a loan when the borrower knows he is in a flood zone and already has insurance), so the common sense part of this is moot.

Please advise as to your opinion.

Thanks.


Here are sources of the requirment:

From the OCC FDPA Examination Handbook:

http://www.occ.treas.gov/publications/publications-by-type/comptrollers-handbook/flood.pdf
Reliance on Prior Determination
An institution may rely on a previous determination when it increases, extends, renews, or purchases a loan. Prior determinations may not be used when a bank makes a loan. However, subsequent transactions by the same institution with respect to the same property, such as assumptions, refinancings and junior lien loans, are considered renewals. A new determination would not be required in those circumstances, assuming the following conditions are met:
• The previous determination is not more than seven years old; and
• No new or revised flood map has been issued in the interim; and
• The determination was recorded on the SFHDF.




From the Act
http://www.fema.gov/media-library-data/20130726-1545-20490-9247/frm_acts.pdf (pages 63 and 64 [73 and 74 of the pdf])

e) Reliance on previous determination
Any person increasing, extending, renewing, or purchasing a loan secured by improved real estate or a mobile home may rely on a previous determination of whether the building or mobile home is located in an area having special flood hazards(and shall not be liable for any error in such previous determination), if the previous determination was made not more than 7 years before the date of the transaction and the basis for the previous determination has been set forth on a form under this section, unless-
1) map revisions or updates pursuant to section 4101(f) of this title after such previous determination have resulted in the building or mobile home being located in an area having special flood hazards; or
(2) the person contacts the Director to determine when the most recent map revisions or updates affecting such property occurred and such revisions and updates have occurred after such previous determination.

I am in agreement with you. Whether or not the property is within an SFHA is not the issue - the map had been updated and therefore a new determination was required prior to modifying the loan. You now have a potential $2,000 uncorrectable flood violation.

If you relied on a previous determination from 3 years ago and made a loan today (10/7) but the map changed 9/30 and you got your LOL notification on 10/25 (I'm positive your vendor does not provide instantaneous notifications) you have a violation subject to a $2,000 CMP.

Thank you skittles.

Dan, does it really matter if the LOL vendor notified us of the map being updated if no one even bothers to look at that info when increasing, renewing or extending? The only thing being done is looking at the last determination date to see if greater then 7 yrs old.

Any other opinions either way?

Dan, does it really matter if the LOL vendor notified us of the map being updated if no one even bothers to look at that info when increasing, renewing or extending?

Maybe I didn't make my comment clear.

If you closed a loan today, 10/7, and the map changed 9/30 with no one checking to see if the map had changed and then you get a map change notice from your vendor on 10/25 that the map changed on 9/30 then you closed the loan on 10/7 without a proper determination in file and you have a violation that is subject to a $2,000 CMP.

Thanks for the clarification Dan. Bottom line is someone, at the time of IRE, needs to check to see if the map was updated regardless if the flood zone was or was not changed. If the map was updated, a new determination should be ordered and maintained in the file (and if in flood zone, notice to borrower, etc.).

Yes, that's correct happyauditor. It's not difficult and can be done very quickly on the FEMA website. Our processors do that here.

Most FHD vendors do a re-cert for a reduced fee also.

Thanks, as usual, very helpful.

Just clarifying to make sure I understand correctly... if a debt modification/loan modification is made on a loan where the property IS located in a flood zone, the customer needs to sign another Notice to Customer of Special Flood Hazard acknowledgement?

If the modification increases the loan or extends the maturity, yes. Also if the existing determination is 7 years old or older, or if there have been any map changes you must obtain an updated determination.

That's what I thought, but just wanted to clarify. Thank you!