While conducting a Compliance Review of some real estate-secured loans for one of the banks in the holding company, I've run across an issue that has me concerned enough to get some feedback.

Common practice at these smaller banks where the Loan Officers and their Admins wear multiple hats is to pull a new Flood Determination (SFHDF) each time they touch the loan (extensions or renewals). That's a practice, and not specifically mentioned in Policy. Sure, we're signed up for Life of Loan monitoring with our vendor (for what it's worth). That Lenders or Admins don't check whether the LAST flood map date for the property/collateral is the same and less than 7 years old so that a new request isn't needed means we are doing unnecessary work. But my concern is that we are very inconsistent with the charges that are passed along to the borrower.

One example: New loan in 2011, 1st pull, $14. Same charge 5 years later when the loan was renewed. Then another extension was done, but the charge was $25. The debt was restructured through another renewal, flood cert charge was $5 this time. The Map Date (2-19-2008) never changed throughout the entire 6+ years. I've also seen instances where, for whatever reason, there hasn't been a charge at all when a new flood cert is pulled.

If the examiners find this practice, is it likely they would: a) crawl inside a hundred more loans to see how widespread the inconsistencies were, and b) tell us to refund the fees charged for any unnecessary Flood Cert requests? Or is it more likely we would just be asked to GET CONSISTENT?

If you charged $25 for a $14 certification you have unearned fee issues. And yes if the examiners discover this practice they will "crawl" inside additional loans and you are most likely looking at reimbursements for the overcharges.

From a fair lending perspective can not charging fees for some certifications and charging for others be justified?

Thanks, Dan, the Fee issue is the obvious one, I didn't think of the Fair Lending angle.

And I know the 'No Charge' question will be answered with "That's the way we've (always, sometimes) done it." I found one loan renewal where the new Flood Cert was only 3 months later than version pulled for the last extension!

Has it been your experience that banks with small staffs (3 or 4 Lenders, 1 or 2 Admins) usually practice pulling a new Flood Cert for the R and E in MIRE instead of educating either the Loan Admins or Loan Officers to check for those 3 conditions that allow you to use an existing Flood Cert?

Most FHD providers offered a recertified FHD for a lesser cost for subsequent events. Takes out all the guess work.

CountryBanker - for in-house, commercial and consumer designated loans we re-use the existing determination as long as it meets the three exceptions, on the SFHDF, less than 7 years old and no map changes. We check the FEMA Community Status Book to make sure there have been no map changes. https://www.fema.gov/national-flood-insurance-program-community-status-book We have 3 loan processors that service 10 branches.

For secondary market loans, which are handled in a separate department, we pull a new determination for each loan request.

We pull a new determination for all requests. It's easier than trying to get the entire loan staff to understand the conditions in which an existing cert is still good. Also, our flood vendor tracks LOL by loan number and would have no way of knowing when any given property either changed loan numbers or needed to be applied to multiple numbers. Simpler all the way around to just get new ones.

Good points all, thanks.

Randy, I'll check whether we are signed up with our reputable, recognized vendor for a reduced-rate 2nd pull. We used the same vendor at my last employer but had a different process. If there was a flood cert already in the file, Loan Admins searched for existing flood certs by address or by Cert Number. No charge & no new pull of a flood cert if it had not changed (in-to-out and out-to-in zone changes were flagged; vendor also sent a monthly report of Map changes). Those steps would help here.

Dan, I haven't investigated how the unit handling secondary market requirements handles this, but I know the frequency of needing a 2nd or 3rd Flood Cert pull for a property is fairly low.

RR Becca, understand about doing what's easy. Who is responsible for watching the charges to the borrower, IF you charge, for Flood Certs on subsequent loan renewals and extensions?

We've got the actual flood cert charge defaulted into our loan templates for all re loan types. That way we only have to train them to delete it if there's not an insurable structure present.