Have a new loan app to purchase a property. Per our determination, the property is in a flood zone. However, we received the flood insurance application and the zone being used is C. Per the agent, the property is being Grandfathered. I am not very familiar with this rule, so I am trying to read up on it. I know in the Q&A, it says if there is a discrepancy due to the rule, we are fine. However, we have to substantiate the finding. I guess my question/s is/are:

1. What must we do on our end to substantiate what the agent is telling us?
2. Do we have the insurance provider change the zone until we substantiate (not sure how long this should take) so as to not hold up closing?
3. Does the rule even apply to purchase transactions?

A grandfathered policy is when I buy a flood policy when my house is in Zone X. Later, my house is rezoned in Zone A. As long as I do not let my policy lapse, then I can keep my Zone X rated policy rates even though the property has been re-rated. The Dec page will say the House is in A, but it is rated at X and the grandfathered box will be checked. If the borrower is just now buying a new policy - the agent is blowing smoke somewhere. Don't accept the application.

Ok, so then I was understanding the rule...it applies to current owners, not future? And we are correct in having them change the zone since this is a new policy for a new owner?

One additional question - was this property newly mapped into a SFHA in the last 12 months?

I don't think so. The property was built in 1997 and the map being used is from 2009.

Then you need to have the application changed to the correct zone.

Perfect, thank you sir! So, am I correct in infer that grandfathering usually is not acceptable in purchase transactions? Or when does this come into play:

2. If a building was constructed in compliance with a specific FIRM, the owner is always eligible to
obtain a policy using the zone and base flood elevation from that FIRM, provided that proof (refer to
the Flood Insurance Manual, Rating section for acceptable documentation) is submitted to the
insurance company. Continuous coverage is not required.

What are you referring too? I don't see that paragraph in the Flood Insurance Manual.

It is a document I found through the FEMA website, titled "NFIP Map & Zone Grandfather Rules"

Well, I see this too to https://www.fema.gov/media-library-data/...nts_03_2016.pdf

However, I don't any mention of this in the Flood Insurance Manual. If appear to be geared significantly to when the structure was built and when the first FRIM was issued and what zone they were in on the first FIRM.

Can't say that I have ever seen this information before.

Is that a good or bad thing haha. I appreciate you help! We decided to err on the side of caution and tell them that we needed that proof of compliance, and are doing some more research on our end as well.