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#2390 - 06/19/01 12:12 PM Flood Monitoring
Anonymous
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The flood regs say that a previous determination may be used again if (i) it is less than 7 years old, (ii) no new or revised flood map has been issued in the interim, ... For those using a vendor for this service, do any of you just obtain "initial" certifications and not life of loan certifications? If so, to what extent are you required to monitor for any map changes during the term of a loan or upon renewal? If I am relying on a 3rd party for an initial determination and do not subscribe to the flood maps, would I have to obtain another initial determination upon renewal of that loan to ensure the maps have not changed or been revised?

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General Discussion
#2391 - 06/19/01 01:00 PM Re: Flood Monitoring
RVFlyboy Offline
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Soaring over Georgia
First, the previous determination is only an option if you are increasing, extending, or renewing the loan for which you previously obtained the determination. If you are making a new loan secured by the property, a new determination is required.

In your scenario, which I'll assume is a renewal, you would not necessarily need a new determination (assuming your prior one is documented on the Standard Flood Hazard Determination form prescribed by FEMA). You could, instead, check the Compendium of Map Changes published by FEMA each six months in the Federal Register and archived at http://www.fema.gov/mit/tsd/DL_comp.htm to see if there have been any map changes.

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Jim Bedsole, CRCM, CBA, CFSA

Opinions expressed are my own, and do not necessarily reflect those of my employer.

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Jim Bedsole, CRCM, CBA, CFSA, CAFP
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#2392 - 06/19/01 03:55 PM Re: Flood Monitoring
Andy_Z Offline
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You also asked, "to what extent are you required to monitor for any map changes during the term of a loan".

Remember MIRE, Make, Increase, Renew and Extend. That is when you have to do checks and Jim noted what could be a common misconception with regards to using an older certification. He is right on, as usual.

So you don't really have to monitor during the loan's term. But if you see a change, I'd get with the customer so they are informed as to the risks. Remember, property in a 100 year flood plain has a 26% chance of flooding during a 30 year mortgage, but only a 1% chance of suffering a fire loss; and almost every homeowner gets fire insurance.

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Andy Zavoina
Opinions stated are not necessarily that of my employer.

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AndyZ CRCM
My opinions are not necessarily my employers.
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#2393 - 06/20/01 01:15 AM Re: Flood Monitoring
Andy_Z Offline
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FYI, the regulator's forum was held at the ABA conference today. Expect a renewed emphasis in the flood regs and an increased potential for civil money penalties when violations are noted. CMPs were specifically mentioned since we have had the new regs long enough to be compliant.

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Andy Zavoina
Opinions stated are not necessarily that of my employer.

_________________________
AndyZ CRCM
My opinions are not necessarily my employers.
R+R-R=R+R
Rules and Regs minus Relationships equals Resentment and Rebellion. John Maxwell

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#2394 - 06/20/01 12:41 PM Re: Flood Monitoring
RVFlyboy Offline
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Soaring over Georgia
One other thing - I don't recall for sure but seem to remember that Fannie Mae and Freddie Mac may have some rules requiring portfolio flood monitoring. There may be some issues here if your loans will be under either of these programs.

Andy is too kind - actually I've had a couple of posts today where I didn't quite hit the mark and had to have a helping hand from someone else. That's why these forums are so good, though. We can all check each other's back.

With regard to Andy's information in this thread - he's right about the risk of flood loss. And even though there may be no REQUIREMENT for you to do portfolio monitoring, you need to do a risk analysis to determine if it would be PRUDENT for you to do so. For example, if my risk assessment indicated that my market area for loans had a fair amount of flood areas, I might make a determination that a portfolio monitoring program would be a good risk avoidance control. Remember, even though not required to monitor, if your borrower suffers a flood loss in a situation where the flood maps had changed, you will most likely be sued. The borrower's case to the jury: The bank should have had procedures to tell me that flood insurance was now necessary. They were obviously concerned about the protection of the property - they required fire insurance even though there was only a 1% chance of a fire loss. Really, jury, how hard would it have been for Megabank, with its millions of dollars of profit each year, to have implemented a simple little program to have someone check for map changes and notify borrowers? Can you say "ka-ching" (that's the sound of the cash register, in case you didn't recognize it).

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Jim Bedsole, CRCM, CBA, CFSA

Opinions expressed are my own, and do not necessarily reflect those of my employer.

[This message has been edited by jbedsole (edited 06-20-2001).]

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Jim Bedsole, CRCM, CBA, CFSA, CAFP
My posts - my opinions

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#2395 - 06/20/01 02:48 PM Re: Flood Monitoring
SMQ, CRCM Offline
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I'm sure I am missing something here. Life of Loan (LOL) monitoring is extremely cheap and our bank has one less thing to worry about. The cost is paid by the borrower. If you are banking in areas with flood issues, why would you even consider not getting LOL on all in-house loans. I know that we do not get it on loans being sold to investors as they generally want those loans on their own plan (for the same reasons as us) but in all other cases LOL simplifies everything about the reg --- that is everything except lenders who still think that flood compliance is optional

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#2396 - 06/21/01 06:12 PM Re: Flood Monitoring
Jan94 Offline
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USA
I need assistance in clarifying about when you have a "new" loan. We subscribe to the reuse of a previous flood determination under the guidelines mentioned above, however, we do a lot of refinances. The regs refer to "renewals" but does not necessarily define the term. Would you consider a refinance a "new" loan? If so, then a new determination would be required?

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#2397 - 06/22/01 07:41 PM Re: Flood Monitoring
David Dickinson Offline
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Central City, NE
If you already have a previous determination on a SFHDF that is less than 7 years old and is still accurate, you can MAKE a new loan and rely upon it. The regulation uses the terms "increase, extend and renew" but if you read the Act and Preamble, they specically state that a loan that is secured by property that has already been reviewed does NOT require a new determination.
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#2398 - 07/03/01 06:16 PM Re: Flood Monitoring
David Dickinson Offline
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Central City, NE
This same string is going on in another ONline Compliance Chat room. Here is my responses copied and pasted from there.

OK, I'm finally back from the ABA Compliance Convention and a week of vacation. Andy, I appreciated your kind words about my being a trusted source, but here is the Federal Register concerning this topic:
Two commenters pointed out that pursuant to section 1365 of the 1968 Act, a lender cannot rely on a previous determination set forth on a SFHD form when it makes a loan, only when it increases, extends,
renews or purchases a loan. The agencies agree with this interpretation of section 1365 of the 1968 Act but note that subsequent transactions by the same lender with respect to the same property will be [[Page 45698]] treated as renewals and will require no new determination. The agencies adopt this provision as proposed.
You can find this on page 45697 & 45698 of the Federal Register dated August 29, 1997 (Volume 61, Number 169) The link is http://www.gpo.ucop.edu/cgi-bin/gpogate?waisdoc=1&doctype=TEXT&docid=::::1602754+247280+/disk3/wais/data/1996_register/fr29au96.dat.wais&server=1996_register/historical.access.gpo. gov

The Nebraska Bankers Association put it this way in a newsletter dated July 31, 1998: A lender may not rely on a previous determination when it is making a new loan, except in the case of a subsequent transaction by the same lender involving the same property - in that case, the loan is teated like a renewal, thus allowing reliance on a previous determination. I understand that this is confusing as it is almost double talk.

Also, Sandra is correct that the FEMA's Mandatory Purchase of Flood Insurance Guidelines do not expand on this, but it all comes down to the definition of what "making" a loan is. But they also go on. On page 33 of this manual, it states: If a borrower obtains a home equity or second mortgage from its first mortgagee that is secured by a secondary lien position . . . the lender can rely upon the original SFHDF if no remapping has occurred.

That's the legal side. Now to address Thomas and Pat's comments. Were not talking about Life of Loan coverage here. Life of Loan is not a requirement but rather a management decision and a contractual issue with your Determination company. How do I know if a map changed since the last time I did a determination? I check the Community Status Book. This is updated daily and lists all the maps by state. You can go dowload these at: http://www.fema.gov/home/fema/csb.htm

Therefore, if I know that a map has not changed, if I have made a previous determination on a SFHDF and it is within the last 7 years, I can rely upon a previous determination even if I am making a new loan.

One little twist: If the property is in a Special Flood Hazard Area, I must give a new notice every time I make, increase, extend or renew. The exemption only applies to a new determination, not notification. Whew!!

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David Dickinson
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#2399 - 07/03/01 07:33 PM Re: Flood Monitoring
Andy_Z Offline
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Well David, welcome back and it was great to meet you face to face.

This all comes back to me now that you mention page 45683-45716 of the Aug. 29, 1996 (you said 1997) Federal Register, (yeah, right ). Actually I think I was in a meeting that day.

Seriously, that is a helpful cite. I had to massage the link a bit but it worked. I have saved this to my HD for reference. I would assume this is definitive enough that no interpretations to the contrary have been made official.

I thank you for the time put into this.

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Andy Zavoina
Opinions stated are not necessarily that of my employer.

_________________________
AndyZ CRCM
My opinions are not necessarily my employers.
R+R-R=R+R
Rules and Regs minus Relationships equals Resentment and Rebellion. John Maxwell

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#2400 - 07/13/01 04:18 AM Re: Flood Monitoring
Kahola Offline
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Kahola
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Scottsdale, AZ. 85255
Does it matter if the Flood Zone type on the hazard insurance policy is not the same as on the Flood Determination? For example, the hazard policy shows AOB and the Flood Determination shows AO. Futhermore, does the hazard policy need to show the Flood Zone type or do we just need to be concerned that the amount of flood insurance is sufficient to cover the loan?

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#2401 - 07/13/01 04:56 AM Re: Flood Monitoring
Andy_Z Offline
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I understand that regulators are comparing these and criticizing the bank when there are variances.

Couple that with the regulators comments at the ABA NRCC last month that they were looking at CMPs for violations to flood regs, and I'd say it could be real important.

------------------
Andy Zavoina
Opinions stated are not necessarily that of my employer.

_________________________
AndyZ CRCM
My opinions are not necessarily my employers.
R+R-R=R+R
Rules and Regs minus Relationships equals Resentment and Rebellion. John Maxwell

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#2402 - 07/12/01 06:24 PM Re: Flood Monitoring
Jan94 Offline
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Posts: 828
USA
I thought I would tack on to this thread rather than start another one, but does the bank need to re-notify the borrower if it renews/refinances a loan on which it already notified the borrower the property was in a SFHA? I thought I read that the bank does have to re-notify, but I can't find it. FEMA's manual states "lenders must continued to notify only those prospective borrowers whose loans secure a building located in a SFHA." Thank you.

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#2403 - 07/12/01 06:34 PM Re: Flood Monitoring
David Dickinson Offline
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Central City, NE
I am not aware of any "previous notification" exception. As we have discussed in this string, there is a previous determination exception but as far as I know, you must notify them again everytime you make, increase, extend or renew. The logic is that they may have to have more insurance since you modified the loan.

[This message has been edited by David Dickinson (edited 07-12-2001).]

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