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#1962724 - 09/17/14 11:34 PM Timing of extensions of loans in flood zone
Marnie Offline
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Nevada
We send out the Flood notice to all loans in a flood zone under the MIRE rules. We typically use the best practice of not closing a new loan until 10 days after notice, considered a "reasonable period". Exceptions do happen when the borrower provides insurance ahead of that and wants to close early, but, again, standard is 10 days.

Being told the 10 day standard should apply to maturity extensions as well, where we shouldn't be actually extending till 10 days from the notice we are sending as required for extensions. Is this accurate? We send the notice, but why would we have to wait 10 days for a loan that already has flood insurance before we can make the exdtension?

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Flood Compliance
#1962737 - 09/18/14 02:47 AM Re: Timing of extensions of loans in flood zone Marnie
rlcarey Offline
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rlcarey
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Galveston, TX
Where are you getting the "10 days" from???? I thought that went away in the 1996 updates to the regulations.
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#1962837 - 09/18/14 03:27 PM Re: Timing of extensions of loans in flood zone rlcarey
Marnie Offline
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Joined: Nov 2007
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Nevada
Yeah, no there is nothing that says 10 days, but it does say "reasonable period of time". When the FDIC was here last they still consider 10 days to be best practice, purpose of which is to allow enough time for customer to buy flood insurance.

But to my question, I don't think either the 10 day best practice or waiting a "reasonable time" would apply to a loan that already has insurance and we are just extending the maturity date. That's what I need to know because this auditor is saying the same standard for new loans applies across the board to extensions as well.

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#1962958 - 09/18/14 07:00 PM Re: Timing of extensions of loans in flood zone Marnie
Marnie Offline
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Joined: Nov 2007
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Nevada
bump

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#1963045 - 09/18/14 08:47 PM Re: Timing of extensions of loans in flood zone Marnie
David Dickinson Offline
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David Dickinson
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Central City, NE
This is an area that the regulators have created much confusion - even when they try to clarify it. Below I have cut/pasted from our outline on this topic:
B. Timing:
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]


When you read the Fed Register comment (#3), it makes it sound like ten days is still required. That's why the FDIC examiners told you it was a best practice.

Here's my answer: When you increase, renew, extend (not make) a loan that already has flood insurance in place, you need to give a new notice. BUT you don't need to delay closing to meet any number of days. Get the borrowers the notice as soon as possible and make sure the insurance is adequate. If so, close the loan. That could be in 1 day if everything lines up.
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#1963053 - 09/18/14 09:05 PM Re: Timing of extensions of loans in flood zone David Dickinson
Marnie Offline
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Joined: Nov 2007
Posts: 437
Nevada
Thanks David!!

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