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#414007 - 08/25/05 06:25 PM Flood Insurance - Yet Another Question
upstateNY Offline
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Joined: Apr 2003
Posts: 933
New York State
Scenario is that the existing loan secured by improved real estate is being renewed. Property is in a flood zone and existing loan has adequate flood insurance. The renewed loan is in an amount less than $5,000 and a term of less than one year. I would say that flood insurance coverage for the renewed loan is not required based upon the dollar amount and term. Anyone agree or disagree?

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#414008 - 08/25/05 06:43 PM Re: Flood Insurance - Yet Another Question
Dan Persfull Offline
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Dan Persfull
Joined: Aug 2002
Posts: 46,762
Bloomington, IN
Disagree. A renewal is just a continuation of the existing obligation. If you refinance it, then I would agree.
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The opinions expressed are mine and they are not to be taken as legal advice.

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#414009 - 08/25/05 10:19 PM Re: Flood Insurance - Yet Another Question
David Dickinson Offline
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David Dickinson
Joined: Nov 2000
Posts: 18,762
Central City, NE
I'm with Dan. If you prepare a whole new note (a "refinance"), then flood insurance is not needed as it meets the "small/short" exemption. If you prepare a "renewal" that does not replace the original loan, you need insurance.
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David Dickinson
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#414010 - 08/26/05 12:38 PM Re: Flood Insurance - Yet Another Question
upstateNY Offline
Platinum Poster
Joined: Apr 2003
Posts: 933
New York State
So, what about the "rule" that says "MIRE", flood insurance applies when you make, increase, renew or extend a loan?

And, a little additional information - because of systems issues, we will be extinguishing the old loan and replacing with a new one. The semantics between the loan and compliance areas are often muddied. Therefore, I would say that flood is not required if the new loan is below $5,000 and term of 1 year or less.

But, that old "MIRE" still has me puzzled.

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#414011 - 08/26/05 01:52 PM Re: Flood Insurance - Yet Another Question
Dan Persfull Offline
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Dan Persfull
Joined: Aug 2002
Posts: 46,762
Bloomington, IN
MIRE refers to the four transaction you mentioned.

As alluded to, renewing a loan is a continuation of the original note therefore flood rules would apply.

If you refinance the loan, your are "making" a new loan that replaces the existing loan. New loans are exempt from the flood rules if < $5,000 and have a term =< than one year.

I would caution that if your new note references the old note, then IMO you have "renewed/continued" the existing note and the flood rules would apply.
_________________________
The opinions expressed are mine and they are not to be taken as legal advice.

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#414012 - 08/26/05 02:27 PM Re: Flood Insurance - Yet Another Question
Patton Offline
Member
Joined: Aug 2005
Posts: 96
Texas
How about this. Drop the collateral and turn it into an unsecured consumer loan. Flood ins. would not ba a concern in this scenario, the exposure is fairly limited and it may be more cost beneficial to the consumer. Just a thought.

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