Reviewing a loan file recently for a purchase of a home and we reused the flood determination from the same customer/same property from the previous year.

The previous application to purchase this home had fallen through and was not originated at that time. The applicants came back a year later to purchase this home after the original issues had been cleared.

The loan staff reused the previous determination from 2021 for the 2022 loan. I indicated that was not allowed relying on the flood QA-SFHDF 4-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.

I am curious am I reading that wrong? I am getting push back that this is allowed as it was same borrower/same property, within 7 years, on the SFHDF.

In my opinion even though we had a previous determination for this property in that borrowers name since that file was not originated we cannot reuse the flood determination for the new purchase application a year later. This was not increasing, extending, or renewing an existing loan.

I have read other threads on here, I have read the Banker's Compliance Consulting article "Reliance On a Previous Flood Determination" and it seems clear the making is not a valid reason to use a previous determination but with the lending department pushback I started doubting myself.

Well, as you said, it clearly says you cannot use a previous determination to make a loan. It also says: 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.

In this case there is not multiple loans.

Water under the bridge now in any event and why, for what? $18? If this ever comes up again, the $18 versus the flood insurance fine, which I think is around $2,400 now is well worth the price.

rlcarey, I agree with your statement regarding the cost/benefit analysis.

However, since the original application was never originated there was no loan and the SFHDF wasn't actually re-used. (It was a year old though).

Do you think that technicality would make a difference in this case?

It is not addressed. You cannot use a previous obtained FHD to make a new loan and you are not making loans to the same borrower secured by the same property. That is what that FAQ says. Everything else is indefensible, if questioned by a regulator, regardless of any common sense approach. What guidance do they plan to point to to say it is OK?

If it came up in an exam as a stand alone issue, rather than a pattern and practice, I'd say the SFHDF was obtained during the earlier application, we have LOL tracking (making an assumption there) that wasn't cancelled have complied with the regulation.

It's not a "previous determination" because it was never used.

Realistically, if the examiner was determined to make an issue out of it, they probably would I wouldn't push back very hard. But for an otherwise compliant program where this is the only issue I think most would give verbal recommendation not to do that and move on.

I am in the camp saying you made a loan with an old - unused - flood determination and I could see an examiner faulting you. As a defense the determination had Life of Loan monitoring, That brings up 2 questions, however:

1. If there was a status change and the flood vendor notified you, where would it have been filed? I see Loan Ops looking for an active loan and then trashing it because nothing was on file as "a loan."
2. Was the applicant billed for that determination? Charging them for something for which they received no benefit - the LOL portion - could be a UDA(A)P offense if there is any additional fee paid.

#2 leads to a defense of why the old determination was used, to avoid a UDA(A)P issue. Though I wouldn't want to argue that very hard either.

Thank you all of you. Good stuff.

The LOL portion was already one of my arguments. That we would have had no tracking during the period between applications.

It's not a "previous determination" because it was never used.

Very dangerous assumption if that is your basis for reusing the determination previously obtained to make a new loan.

My argument was about that one time that it happened. I wouldn't rely on this for a process and I wouldn't use this as my standard process.

But I would push back on a finding a little bit.

We are deferring payments due to a natural disaster, would that constitute as a MIRE event? Would I need to obtain a SFHDF for this type of transaction? Maturity date remains, payments remain unchanged; however, deferred payments will be collected at loan maturity.

IMO, no. You are not making, increasing, renewing or extending a loan.