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#2155239 - 11/29/17 02:25 PM Flood Question on Map Changes
Need2know Offline
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Is there any regulatory requirement to notify customer when their property is NO LONGER in a flood zone?

What if Bank happens to be escrowing for premiums due to the fact property was a flood zone /first lien property at origination?
RESPA does not allow us to terminate escrow unless customer requests, however, RESPA also does not allow us to collect funds for a payment we now know is not required.

What are the regulatory citations in the Flood rule and in Respa that address this?

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Flood Compliance
#2155409 - 11/29/17 09:51 PM Re: Flood Question on Map Changes Need2know
David Dickinson Offline
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No.

RESPA doesn't prohibit you from terminating an escrow. If you're referring to the Escrow Closing Disclosure in Reg Z [§1026.20], the lender can still cancel the escrow. They must give it to the consumer no later than 30 precise business days prior to closure of the escrow account. [§1026.20(e)(5)(ii)]
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#2162581 - 01/31/18 05:49 PM Re: Flood Question on Map Changes Need2know
Tesla Offline
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Jumping on this thread and the topic heading would have been similar to what I would have added.

When there is a map change and you have life of loan monitoring and the property moves into a flood zone, you require flood insurance, but can you require an escrow account? As I read the rule, it appears to indicate the escrow is only required if there is a MIRE event which this is not, but I feel like in some training I attended with David Dickinson smile , there was a comment made that we should require it. I just can't remember if I am remembering that correctly.
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#2162616 - 01/31/18 07:37 PM Re: Flood Question on Map Changes Need2know
David Dickinson Offline
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David Dickinson
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If you MIRE an applicable loan after 1/1/16, you must require the escrow of flood insurance (unless you qualify for an exception). But if there's a map change that triggers you to require flood insurance on an existing loan, I don't believe you must require an escrow. §339.5(a)(1) states:

Unless otherwise exempt a bank must …require the escrow of all premiums and fees for any flood insurance required… for any designated loan secured by residential improved real estate or a mobile home that is made, increased, extended, or renewed on or after January 1, 2016…

I think many examiners will question why you don't have an escrow on a loan like this however, but I believe it is not required. Another question would be "why not?"
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#2162667 - 01/31/18 09:55 PM Re: Flood Question on Map Changes Need2know
Tesla Offline
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Ok, thanks David. I think that is how I remember you explaining it in the training too, but I wasn't sure and as I read the rule, it appeared it was not necessary. I agree we might as well escrow but a borrower who pushes back would be within their rights to do so.

As always, thank you for your help and expertise!
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#2163140 - 02/05/18 07:53 PM Re: Flood Question on Map Changes Need2know
John Burnett Online
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Even when the borrower is within his rights to push back, the bank can impose an escrow requirement. There are banks that would prefer never to hold tax payments and hazard (including flood) premium payments in an escrow account; there are also banks that require them as a matter of policy.
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#2174418 - 04/20/18 01:46 PM Re: Flood Question on Map Changes Need2know
Aruba123 Offline
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Joined: Jan 2012
Posts: 70
New York
Jumping in on this thread. If a property is mapped out of a SFHA, is there a timing requirement (besides "timely" to notify the borrower that flood insurance is no longer required? I can't find anything that supports there is. Thank you!

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#2174421 - 04/20/18 01:57 PM Re: Flood Question on Map Changes Need2know
rlcarey Online
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Galveston, TX
There is no requirement to make any notification to the borrower if the property is removed from a SFHA. If you are going to do so, I suggest to do it very carefully as to not give them the impression that they should cancel their flood insurance.
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#2174423 - 04/20/18 02:03 PM Re: Flood Question on Map Changes Need2know
Aruba123 Offline
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Joined: Jan 2012
Posts: 70
New York
Ok. Thank you! We do let them know that it is strongly suggested that they still maintain flood insurance on their property for their protection, however, it is no longer a bank requirement.

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#2207999 - 03/06/19 08:08 PM Re: Flood Question on Map Changes Need2know
Tesla Offline
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Reviving this thread - do you need to send a Notice of Special Flood Hazard Area if you are notified via Life of Loan monitoring that a property that was in flood zone AE- is STILL in flood zone AE but the map number and date changed?
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#2208018 - 03/06/19 09:09 PM Re: Flood Question on Map Changes Need2know
rlcarey Online
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No.
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#2208022 - 03/06/19 09:22 PM Re: Flood Question on Map Changes rlcarey
Tesla Offline
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Thank you!
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