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#2062465 - 02/04/16 06:16 PM Flood Notice for Bare Land
Christina the Auditor Offline
Member
Joined: Sep 2006
Posts: 89
We had a loan close on 1.26 for bare land (building to be constructed a few months down the line). The signed flood notice in the file is for 1.27, the day after the loan closed. Construction of the building did not begin until March. The application was dated early December. I wrote the officer up for "late" notice, as it wasn't on or before the loan date. He contends that it doesn't matter since the building construction hadn't started yet. Can someone help clarify?

Thanks!

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Flood Compliance
#2062467 - 02/04/16 06:20 PM Re: Flood Notice for Bare Land Christina the Auditor
Skittles Offline
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Skittles
Joined: Sep 2002
Posts: 13,965
TN
So the property to be built is within an SFHA? If so, the borrower needs to receive the notice a 'reasonable' amount of time prior to loan origination.
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#2062692 - 02/05/16 04:33 PM Re: Flood Notice for Bare Land Christina the Auditor
Dan Persfull Offline
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Dan Persfull
Joined: Aug 2002
Posts: 47,517
Bloomington, IN
Your loan was for the purchase of the land only, correct? If so no flood notice is required provided none of your loan proceeds are to be used for the construction of the building.

Once you become aware that a building has been placed on the property then you must require flood insurance at that time.
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The opinions expressed are mine and they are not to be taken as legal advice.

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#2062991 - 02/08/16 04:18 PM Re: Flood Notice for Bare Land Skittles
Christina the Auditor Offline
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Joined: Sep 2006
Posts: 89
The loan purpose states "construction of a 60 x 100 building."

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#2063271 - 02/09/16 04:10 PM Re: Flood Notice for Bare Land Christina the Auditor
David Dickinson Offline
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David Dickinson
Joined: Nov 2000
Posts: 18,762
Central City, NE
If the loan was to contract a building, then it's a "covered loan". Therefore, the SFHDF had to be done prior to consummation and the Flood Notice must be delivered a "reasonable period of time PRIOR to closing". The purchase of the Flood Insurance can be delayed, but not the Notice.
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David Dickinson
http://www.bankerscompliance.com

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#2063283 - 02/09/16 04:55 PM Re: Flood Notice for Bare Land Christina the Auditor
Dan Persfull Offline
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Dan Persfull
Joined: Aug 2002
Posts: 47,517
Bloomington, IN
I agree with David's comments. The only question I would ask is will funds be advanced when the construction of the building begins or has all the proceeds already been advanced and the borrower will use those funds in March to construct the building? If all the funds have been advanced what safeguards have you put in place to insure the borrower purchases the flood insurance when construction of the building begins?

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