I have a little twist on this, I think. This organization creates a separate "note" for the workout agreement that runs concurrently with the original note. The maturity date on the workout note was recently extended and the loss mitigation specialist relied on a previous flood determination more than 10 years old. Is this a violation when the original note's maturity date was not extended but the workout note maturity date was extended? I'm not sure. What do you think?

How can you have two notes? If you do, they are separate loan agreements.

This organization creates a separate "note" for the workout agreement

Is this note secured by the designated property? If yes then it is subject to the flood regulations and you have a violation for relying on an SFHDF that is older than 7 years.

Yes, the workout note is secured by the property in a SHFA. Thanks Dan, that is what I thought, but I was afraid they would say since the original loan terms were not extended it would not apply.

If they want to argue just remind them that all notes, whether it's 1 or 100, secured by the property are individually subject to the flood regulations.

I have a request to modify the interest rate on an existing consumer purpose loan secured by a property in a SFHA. At the time of loan origination, the property was located in a non-participating community. I went to check to see if the map had changed and it did not. However, the community is now a participating community. How do I handle this request? We aren't doing anything on the loan but changing the interest rate and possibly reducing the term remaining.

Do we have to require flood insurance now since the community participates? If so, we will be required to escrow the premiums.

Since you now know, whether you modify the loan or not, the trigger has been pulled and it requires flood insurance. If you modify the loan, then escrow is triggered..

Just in case you need backup for Randy's comment:

§ 339.7 Force placement of flood insurance.

(a) Notice and purchase of coverage. If an FDIC-supervised institution, or a servicer acting on its behalf, determines at any time during the term of a designated loan, that the building or mobile home and any personal property securing the designated loan is not covered by flood insurance or is covered by flood insurance in an amount less than the amount required under § 339.3, then the FDIC-supervised institution or its servicer shall notify the borrower that the borrower should obtain flood insurance, at the borrower's expense, in an amount at least equal to the amount required under § 339.3, for the remaining term of the loan. If the borrower fails to obtain flood insurance within 45 days after notification, then the FDIC-supervised institution or its servicer shall purchase insurance on the borrower's behalf. The FDIC-supervised institution or its servicer may charge the borrower for the cost of premiums and fees incurred in purchasing the insurance, including premiums or fees incurred for coverage beginning on the date on which flood insurance coverage lapsed or did not provide a sufficient coverage amount.

"If an FDIC-supervised institution". We are not supervised by FDIC, is this still applicable to our institution?

Look to the appropriate section in your Regulator's version of the Flood regulations.

I have a some scenarios that I am curious as to whether or not we must view the flood map for changes and possibly obtain a new determination. We have a program that allows us to "convert" the interest rate on real estate secured loans. We modify the existing Note in these circumstances.

Yes or No?
Interest rate change only.
Interest rate change plus a fee charged that is added to the loan.
Interest rate change plus reduction in term to maturity.
Interest rate change plus extension in term to maturity.

Do the answers change based on whether or not the original loan was in a flood zone and a notice was provided?

1. No
2. Yes
3. No
4. Yes

Flood procedures are required when you have a MIRE (Make, Increase, Renew, Extend) event. The second would be a MIRE event if you increase the note by the fee amount (in my opinion). Obviously the fourth is an extension and flood procedures are required.

Thank you for the quick response.

If the property was not in a flood zone at origination, do we still go through the same steps? (if the determination is greater than 7 years old, pull a new one? If the determination is not greater than 7 years old, look to see if the map changed and if it did, then pull a new determination?)

Yes - the steps are required and if the current determination is over 7 years old (or the maps have changed) then you should pull a new determination. Also, if the improvements are within an SFHA then you need to give the flood insurance disclosure again and retain a copy for your files.