Situation: Loan is supposed to close on Friday, but the Notice of Special Flood Hazard has not been signed. A "reasonable amount of time" in the act is described as 10 days. The customer is aware that flood insurance will be required, but would the closing date need to be changed to meet the 10 days?

I believe that is so the borrower has sufficient time to obtain insurance. So long as they have a binder at closing, I would not worry about it. Evidently, verbal notice was given since they are aware it's required.

I agree with Suzy. The 10 days, IMO, is a suggested number of days as being reasonable. I've looked at this way, if you fine out 2 days before the closing (althouh I'd question why you would wait that long to get the FZD) the property is in a SFHA and you tell your customer that they need flood insurance before the loan can close and they are able to obtain the insurance before closing, you gave them a reasonable notice to obtain flood ins. If they say I can't possibly get the insurance within that time, then I would kick in the 10 days.

As for signing the Notice of Special Flood Hazard, as long as you have it documented that it was sent within "the reasonable time", I would get it signed at the closing.

If your flood insurance portfolio is otherwise clean, this probably won't be an issue. FDIC wrote us up because they found a few loans where the customer was not given 10 days notice, of course they found issues with a couple other files as well so maybe that influenced their decision.

According to the nice notebook I received last March at Compliance School (Thanks David!), the notice must be provided "no later than commitment if the period between commitment and closing is less than 10 days."

Given this, I would think that if the notification was made when the loan was approved (my definition of commitment), that you would be in the clear, but may necessitate an explanatory memo.

Your welcome R.G. The 10 days is a "rule of thumb", no longer a requirement. The law states in section 208.25(i)(2): The member bank shall provide the notice required by paragraph (i)(1) of this section to the borrower within a reasonable time before the completion of the transaction, and to the servicer as promptly as practicable after the bank provides notice to the borrower and in any event no later than the time the bank provides other similar notices to the servicer concerning hazard insurance and taxes. Notice to the servicer may be made electronically or may take the form of a copy of the notice to the borrower.

mmason: how could you be cited for not giving the notice 10 days before closing? BTW, the FDIC would reference this exact wording in section 339.9(c).

I agree that the 10 day requirement is gone. I would like to hear what others consider "sufficient" time. I generally only cite an exception when it is the day of closing (or later). I also recommend that a flood cert be obtained right after you have looked at the credit report. But, what are other folks doing?

I feel if the bank has had the flood determination for a month stating the property is in a flood zone, that the notice should be provided at least a week prior to the closing. I don't understand why the lending area (lenders and processors) don't immediately forward the document. Of course I was never a lender.

They did reference section 339.9(c) then went on to say "A review revealed four loans where the flood notice was not prvided in a timely manner. Usually ten days prior to the loan closing is considered a reasonable time to provide the notice." Two of the 4 were signed a day or 2 before closing and the other 2 at closing, verbal notice had been given but the signature was obtained when they closed. I've had everyone start sending it certified mail so we have proof they were notified in advance even if they don't sign until closing, but I guess I won't stress if it's not exactly 10 days prior.

YOur "UK" initials caught me by surprise. The last time I say them, they had been burned into a surgical patient's body part prior to removal and had created quite a news story on NBC. Also, a couple of pending lawsuits against the surgeon. You don't go around leaving your mark in the bank, sorta like ZORO do you? (This is all in jest, please don't be upset)

mmason said:

In reply to:

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"A review revealed four loans where the flood notice was not provided in a timely manner. Usually ten days prior to the loan closing is considered a reasonable time to provide the notice." Two of the 4 were signed a day or 2 before closing and the other 2 at closing, verbal notice had been given but the signature was obtained when they closed.

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That makes more sense. The 2 signed at closing is a definite violation. Also, it isn't technically OK to provide a verbal notice and have the borrowers sign at closing, but this happens a lot. I'm assuming the loan officers must have talked too much.