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#2179320 - 05/23/18 03:51 PM Closing for flood
liventhedream Offline
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I know this may seem like a stupid question but, where can I find a definition of closing for flood? Often in bigger deals documents are signed on one day and funds are not disbursed until several days latter. Would closing be when funds are disbursed or when documents are signed?

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Flood Compliance
#2179328 - 05/23/18 04:11 PM Re: Closing for flood liventhedream
Skittles Offline
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TN
It has always been my understanding that it's the day the documents are signed.
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#2179331 - 05/23/18 04:15 PM Re: Closing for flood liventhedream
rlcarey Offline
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Galveston, TX
What is the context of your question? Policy effective dates?
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#2179396 - 05/23/18 05:57 PM Re: Closing for flood rlcarey
liventhedream Offline
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yes for the policy effective date and the notice requirements.

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#2179411 - 05/23/18 06:31 PM Re: Closing for flood liventhedream
rlcarey Offline
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Galveston, TX
As long as the policy is effective prior to loan funding, I don't see it as an issue. I am unsure as to what notice you might be referring too.
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#2179425 - 05/23/18 06:48 PM Re: Closing for flood liventhedream
Dan Persfull Offline
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Bloomington, IN
I have always, except in the case of a construction loan where you can wait to have the insurance in place before you make first draw once the footers are in place, held that the flood insurance needs to be in place as of the date the loan closes (is made). IMHO disbursement/funding/settlement or whatever you refer to it as is not a factor.

An FDIC-supervised institution shall not make, increase, extend, or renew any designated loan unless the building or mobile home and any personal property securing the loan is covered by flood insurance for the term of the loan.

You made the loan as of the date the loan closed which in most states is when the loan documents are signed.
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#2179450 - 05/23/18 07:28 PM Re: Closing for flood liventhedream
rlcarey Offline
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Galveston, TX
Dan, I agree with you and as a general policy, I agree. It is just easier - policy needs to be in place when documents are signed. For an after the fact criticism, I would be pulling out the funding date argument.

But it might depend on the situation and State law as far as loan closing. In Texas, if I have loan documents dated 05/25 and I sign the documents on 05/23, the date of the documents control if there is a discrepancy between the document date and the notary date.
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#2192479 - 09/13/18 05:51 PM Re: Closing for flood liventhedream
ahkcompliance Offline
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Midwest
I just discovered we have a loan closing tomorrow but the binder we received today shows and effective date of 10/6. We have receipt that policy was paid for on 9/6 bu there is a 30 day waiting period. I do not believe we can close tomorrow? Correct?

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#2192485 - 09/13/18 06:09 PM Re: Closing for flood liventhedream
RR Joker Offline
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That sounds like a mistake. There is no waiting period when the policy is issued in connection to a loan closing. A quick call should clear that up. Having said that, a binder is not sufficient, you need to get the application [along with your paid receipt].
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#2192490 - 09/13/18 06:29 PM Re: Closing for flood liventhedream
ahkcompliance Offline
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Posts: 2,470
Midwest
The agent told us since its a new policy its an automatic 30 day wait from date submitted. We have the application and paid receipt. This is a refi as the borrower paid cash at auction and now just doing his loan. Would that make a difference?

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#2192493 - 09/13/18 06:33 PM Re: Closing for flood liventhedream
burke116 Offline
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Joined: Jun 2014
Posts: 542
RVA
Quote:
The insurance agent told us that since its a new policy its an automatically 30 days from the date submitted.


I would be pushing back on that.

From the FDIC compliance manual:

Waiting Period
NFIP flood insurance policies that are not issued in conjunction with the making, increasing, extending or renewing of a loan have a 30-day waiting period. The congressional intent behind this requirement was to prevent the purchase of flood insurance (and any direct loss to the U.S. government) in times of imminent loss.

From FEMA General Rules- April 2017:

No Waiting Period (Loan Transaction)
Flood insurance that is initially purchased in connection with the making, increasing, extending, or renewal of a loan shall be effective at the time of loan closing, provided that the policy is applied for at or before closing.

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#2192498 - 09/13/18 07:02 PM Re: Closing for flood liventhedream
RR Joker Offline
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this ^^^

If it's a private policy it still needs to meet NFIP standards wink
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#2192499 - 09/13/18 07:03 PM Re: Closing for flood liventhedream
RR Joker Offline
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FIWI, I have found over the years that a lot of insurance agents are not very knowledgeable when it comes to NFIP.
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#2192500 - 09/13/18 07:08 PM Re: Closing for flood liventhedream
mtngrrl Offline
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Northern California
^^^
Understatement of the year. Last week we had an agent slam the phone down on our Flood Dept supervisor, because we were pushing back on a private policy that was BLATANTLY noncompliant.
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#2192506 - 09/13/18 07:34 PM Re: Closing for flood liventhedream
ahkcompliance Offline
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Joined: Sep 2008
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Midwest
Thanks all! I agree with insurance agents not knowing! I talked to the agent myself and he was wrong. Looks like the policy will be good with no waiting period.

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#2192512 - 09/13/18 07:49 PM Re: Closing for flood liventhedream
RR Joker Offline
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smile
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