Compliance Alliance Q&A 4/14/2020

Q: I thought that any time a loan balance was increased the Bank would have to run a new flood determination. Is that correct?

 

A: Yes, it is the case that if the previous determination is not more than 7 years old, and the basis for the previous determination was recorded on the Special Flood Hazard Determination Form, and there were no map revisions affecting the property since the original determination was made, then the original determination can be used to increase, extend, renew, or refinance a loan.  

Making a loan is also an acceptable purpose to use a prior determination, if the loan is made to the same borrower, such as in the instance of multiple loans to the same borrower secured by the same property.  However, in the event that you made a loan to one borrower on a particular property and 3 years later you were going to make a loan to another borrower in order to buy this same property, you'd need to pull a new determination because there is a different borrower than was listed on the original determination.


An institution may rely on a prior flood determination, whether or not the security property is located in an SFHA, and it is exempt from liability for errors in the previous determination if: 

• The previous determination is not more than seven years old, and 

• The basis for the previous determination was recorded on the SFHDF.

...
An institution may also rely on a previous determination, which is not more than seven years old and is set forth on an SFHDF, when it increases, extends, renews, or purchases a loan.
FDIC Flood Manual, p. 6.8 https://www.fdic.gov/regulations/compliance/manual/5/v-6.1.pdf

 

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.

Interagency FAQ #68, p. 6.33 https://www.fdic.gov/regulations/compliance/manual/5/v-6.1.pdf

 
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