We have a customer with multiple loans that has recently requested an assumption by the company they created. Does an assumption, executed by only an assumption agreement - no new loan, trigger flood compliance, namely a new SFHDF (if older than 7 years) and a Notice of SFHA, if applicable?

Thanks in advance.

Never mind...I have my answer

And the answer is?

68. May a lender rely on a previous determination for a refinancing or assumption of a loan or multiple loans to the same borrower secured by the same property?
Answer: It depends. Section 528 of the Act, 42 U.S.C. 4104b(e), permits a lender to rely on a previous flood determination using the SFHDF when it is increasing, extending, renewing, or purchasing a loan secured by a building or a mobile home. Under the Act, the “making” of a loan is not listed as a permissible event that permits a lender to rely on a previous determination. When the loan involves a refinancing or assumption by the same lender who obtained the original flood determination on the same property, the lender may rely on the previous determination only if the original determination was made not more than seven years before the date of the transaction, the basis for the determination was set forth on the SFHDF, and there were no map revisions or updates affecting the security property since the original determination was made. A loan refinancing or assumption made by a lender different from the one who obtained the original determination constitutes a new loan, thereby requiring a new determination. Further, if the same lender makes multiple loans to the same borrower secured by the same improved real estate, the lender may rely on its previous determination if the original determination was made not more than seven years before the date of the transaction, the basis for the determination was set forth on the SFHDF, and there were no map revisions or updates affecting the security property since the original determination was made.

Regarding the following FAQ -

5. Does the Regulation apply to loans that are being restructured or modified?
Answer: It depends. If the loan otherwise meets the definition of a designated loan and if the lender increases the amount of the loan, or extends or renews the terms of the original loan, then the Regulation applies.

Would Flood compliance be triggered by a modification (done via modification agreement) done to re-amortize the loan due to a principal reduction, payment due date change, or to remove a debtor from the loan due to divorce or death?

Unless you are increasing the loan amount or extending the maturity - no.

Do you know what is meant by "or renews the terms of the origination obligation"? I couldn't find any elaboration on this subject.

When we renew or refinance a loan, it is almost always because we are changing the terms of a loan, for example, moving from a balloon loan to amortizing loan where the maturity is extended or because we are increasing the loan amount for a cash out. Both of these would trigger under the "increase or extend" rule.

I can't think of any scenario where a loan is just renewed and nothing at all changes.

Renew is if you had a 5 year loan and you are renewing it for another 5 years. So - it really is just an extension.

Thanks very much for the help