If the initial loan term of the Note is being extended 3 months, and forced placed flood insurance is in effect, am I required to treat the loan modification as a new loan? Meaning I would have to cancel the forced placed flood insurance and request insurance from the borrower prior to closing the modification? I have already accessed a new SFHDF and it is still in a flood zone, the borrower will be required to sign prior to consummation; however, the part that confuses me is the issue with the forced placed flood insurance and whether it can continue or whether I have to cancel it and then request from borrower.

Thanks in advance.

There is no official guidance. You can't force place to make a loan, but in this case the force placed insurance is already in effect.

Unless this was a work-out situation, I would be telling the borrower to just pay up when the loan comes due and you are not granting them any extensions as they are currently in default on their current loan by not keeping current flood insurance. Just tell them you don't extend loans for people that are currently in default unless it is done solely in the interest of the bank.

I have little patience for such customers that I give money too that do not hold up their part of the bargain.

Thanks for the input. My bank is OCC regulated and I could not find any specific guidance. This isn't a workout loan, this is a large construction loan where the initial interest only draw period is set to expire before it goes into P and I over 20 years. The borrower just wants to add an additional 3 months on the draw period to pay off remaining invoices, etc.

The reason its force placed is we had an issue with our flood service provider prior to origination. The loan closed. We discontinued their service and our new flood service provider states it is in a flood zone. We have documentation from the borrower that prior to construction, he filed a CLOMR with fill and it is currently being reviewed by FEMA. I have 3 separate independent documents stating the fill raised the structure 4 feet above the base flood elevation, one of them being from the county flood plain manager. But because we don't have any "official" documentation from FEMA regarding the revised tract of land, we have to continue to carry the insurance.

The problem I am encountering is there is nothing regarding guidance on modifications such as this so I was reaching out to my BOL colleagues for input.

Well, I can tell you one thing. Flood plain management rules requires that the base floor of any new building constructed be located above the base flood elevation. That can be accomplished through fill or pillar - depending on the engineering impact that allowing fill may have on other properties within the flood plain. Just because they raised the elevation of the building to meet flood code does not grant them an automatic LOMR.

You also need to read up on what a CLOMR really is, as if they think they won't have to buy insurance because a LOMR being issued is emanate has another think coming. This is a long process:

https://www.fema.gov/national-flood-insurance-program-2/conditional-letter-map-revision

Tell the borrower to get coverage now, as I doubt the OCC is going to have much patience based on the circumstances that you have described.