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#2142470 - 08/17/17 07:36 PM Property taken as security post closing
Bec Offline
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Bec
Joined: Jul 2010
Posts: 1,114
The Great White North
Commercial loan that was closed on 6/1. The lender informed me around 6/23 that they were taking a property as security after the fact and pulled a flood determination on 6/23. Notice to borrower was dated 6/27 and the property was added to the loan on 8/1/2017. Looking at the credit review, however, it appears that the intention was to bring the property in as collateral from the very beginning, they were waiting due to wanting to get an appraisal on the commercial property. My fear is that because they were always intending to use the property, they should have pulled flood and had the notice to borrower signed at application/credit review side of things, not when they were finally getting ready to add in the property as collateral. Do you guys see problems with this, am I overanalyzing?
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Flood Compliance
#2142496 - 08/17/17 08:37 PM Re: Property taken as security post closing Bec
David Dickinson Offline
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David Dickinson
Joined: Nov 2000
Posts: 18,762
Central City, NE
If I understand correctly, the loan was closed on 6/1 but was NOT secured by improved real estate. The loan was modified to add the improved real estate on 8/1st.

If that understanding is correct, you're fine. The SFHDF was complete prior to taking the real estate as collateral and Notice was delivered a reasonable period of time before the collateral was added. The only thing you didn't mention was the insurance. Was it in place prior to or on 8/1st?
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#2142637 - 08/18/17 03:51 PM Re: Property taken as security post closing Bec
Bec Offline
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Bec
Joined: Jul 2010
Posts: 1,114
The Great White North
The insurance was in place prior to 8/1.
Let me add this nugget. The borrowers of the note in question own a business. The business has a security interest in the same property. That is why flood insurance was already in place. I did not notice anything regarding cross collateralization on the note in question (I think that is addressed in the mortgage anyway, isn't it?) and the note in question definitely did not have the security interest on the property at inception. It was definitely added in on 8/1.

I am not in trouble because the note in question was underwritten with the intent to always be secured by this property which we already had a lien, am I? By your reasoning, I would think maybe not. The cross collateralization contingency is in the mortgage that we already had and would apply to all loans secured by that property, but the property wasn't secured by the note in question until 8/1 so I think we are ok there.

Where I am getting hung up in is that the lender knew he was taking the mortgage at application (6/1) and would that have triggered the flood event?
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