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Thanks for the question. This is referring to the bank’s attorney just as it is referring to a director, officer, or employee of the bank.
The definintion of building is a walled and roofed structure, other than a gas or liquid storage tank, that is principally above ground and affixed to a permanent site, and a walled and roofed structure while in the course of construction, alteration, or repair. It doesn’t seem like your pole barn meets that criteria. And since the detemrination, as well as the notice and purchase, requirements all hinge on whether whether you’re taking a building or mobile home as collateral you would not need to do a determination.
§ 339.6 Required use of standard flood hazard determination form.
(a) Use of form. An FDIC-supervised institution shall use the standard flood hazard determination form developed by the Administrator of FEMA when determining whether the building or mobile home offered as collateral security for a loan is or will be located in a special flood hazard area in which flood insurance is available under the Act. The standard flood hazard determination form may be used in a printed, computerized, or electronic manner. An FDIC-supervised institution may obtain the standard flood hazard determination form from FEMA’s Web site at http://www.fema.gov.
(b) Retention of form. An FDIC-supervised institution shall retain a copy of the completed standard flood hazard determination form, in either hard copy or electronic form, for the period of time the FDIC-supervised institution owns the loan.
§ 339.9 Notice of special flood hazards and availability of Federal disaster relief assistance.
(a) Notice requirement. When an FDIC-supervised institution makes, increases, extends, or renews a loan secured by a building or a mobile home located or to be located in a special flood hazard area, the FDIC-supervised institution shall mail or deliver a written notice to the borrower and to the servicer in all cases whether or not flood insurance is available under the Act for the collateral securing the loan
Requirement to Purchase
An FDIC-supervised institution shall not make, increase, extend, or renew any designated loan unless the building or mobile home and any personal property securing the loan is covered by flood insurance for the term of the loan. The amount of insurance must be at least equal to the lesser of the outstanding principal balance of the designated loan or the maximum limit of coverage available for the particular type of property under the Act. Flood insurance coverage under the Act is limited to the building or mobile home and any personal property that secures a loan and not the land itself.Question 1: I agree. I would say this should occur prior to the renewal to the insurance clerk could ensure the FP insurance is still in place prior to renewal. Also, you might want to consider if you want to rely on the existing FP policy for MIREs on the same property or if you want to require the borrower to obtain a policy.
Question 2: The best process would be to require the borrower to purchase flood insurance as required by law for flood loans and in accordance with your loan contract. You can’t have a MIRE event and purchase a new FP flood policy in order to meet flood requirements – FP flood insurance is intended to be used during the term of the loan when insurance is insufficient, not at closing. (See the exceprt from FDIC exam manual below. This was also stated in the Mandatory Purchase Guidelines book that is now rescinded. Even though that guide was rescinded, I don’t know of any information that has changed that interpretation.)
With that said, I have heard that examiners are ok with renewing a loan and relying on FP flood insurance you already have in place on that property (confirm this with your examiners before you rely on this as it isn’t stated in the regulation). If your examiner says you can renew the loan with the existing FP flood insurance, check with your FP vendor to see if they can update the existing FP policy loan info associated with the policy. However, I do wonder about the gap between when the loan matured and when the renewal was done… I’m not sure how the FP policy acts during that gap…. is it still in effect, is the banks still managing it during the gap, etc.? I would want to investigate that a little further. Again, for various reasons, the best approach would be to require the borrower to purchase flood insurance rather than relying on a FP policy.
From the FDIC Exam Manual: “Force placement authority is designed to be used if, over the term of the loan, the institution or its servicer determines that flood insurance coverage on the security property is deficient; that is, whenever the amount of coverage in place is not equal to the lesser of the outstanding principal balance of the loan or the maximum coverage available under the NFIP.”
Question 3 & 4: This shouldn’t be an issue since you aren’t FP a policy at origniation.
If I’ve misunderstood your question please let me know.
Thanks for your patience.
While that does seem to be the case with the way the law is worded (and I think you could make a good arguement for this interpretation), this has been an area that has been debated over the years and I think there are still differing opinions. One reason for this debate is that in other areas of the Red Flag rules, such as address discrepancy, it does require you form a reasonable believe that the report actually relates to the consumer on which you requested it. Aside from this discussion, you might want decide your bank wants to know who you’re dealing with/if it is a fraudulent app even in a denial situation? Since this is an area that there’s been confusion in, I would either take the conservative approach and apply it regardless of action taken or talk with your regulator to get their take.
From the FRB exam manual:
Section 605A(h)(1)(B) requires users of consumer reports, including financial institutions, to verify a consumer’s identity if a consumer report includes a fraud or active duty alert. Unless the financial institution uses reasonable policies and procedures to form a reasonable belief that it knows the identity of the person making the request, the financial institution may not • Establish a new credit plan or extension of credit (other than under an open-end credit plan) in the name of the consumer, • Issue an additional card on an existing account, or • Increase a credit limit.Also take a look at the Red Flag rules in FRB’s Reg V, Appendix J, Section iv regarding responding to Red Flags (including fraud alerts).
1026.19(e)(4) states:
Provision and receipt of revised disclosures.(i) General rule. Subject to the requirements of paragraph (e)(4)(ii) of this section, if a creditor uses a revised estimate pursuant to paragraph (e)(3)(iv) of this section for the purpose of determining good faith under paragraphs (e)(3)(i) and (ii) of this section, the creditor shall provide a revised version of the disclosures required under paragraph (e)(1)(i) of this section or the disclosures required under paragraph (f)(1)(i) of this section (including any corrected disclosures provided under paragraph (f)(2)(i) or (ii) of this section) reflecting the revised estimate within three business days of receiving information sufficient to establish that one of the reasons for revision provided under paragraphs (e)(3)(iv)(A) through (F) of this section applies.
You have three business days from the date you receive the changed circustance information to issue a revised LE estimate to reset fees associated with that change. It sounds like you did not issue the revised LE during that time, therefore, you fees did not reset. I would consider the fee that exceeded tolerance of the initial LE (or the LE you had issued prior to the change) to be the test for tolerance.
That is my understanding. As long as it is was worded properly, I don’t see an issue with obtaining consent even if the customer hands it to you, if you would prefer to do that.
1) I believe anyone that is the subject of the tax return would need to sign the consent.
2) The IRS seemed to imply in their information that this would apply to information obtained directly from the IRS.
3) If the consent is worded properly consent should not have to be reobtained. See #2 regarding obtainin returns from the borrower.
4) This applies to info received after Dec. 28, 2019. If it is an existing loan and you are receiving return information from the IRS it seems consent is required if it hasn’t already been obtained.
5) If consent hasn’t been obtained and you are getting new tax returns from the IRS, regardless if it is for a new loan or a modification, it seems consent would need to be obtained prior to obtaining the tax returns from the IRS.
6) I think it will depend on how the consent form is worded. Something to think about… it might make it easier for loan staff to have one standard procedure for each loan – fewer decisions generally means fewer errors.https://www.irs.gov/newsroom/taxpayer-first-act-cybersecurity-and-identity-protections
“This provision limits the redisclosure and use of return information in the case of taxpayers who have consented to the disclosure of their return information by the Internal Revenue Service to a third party under IRC section 6103(c). Section 2202 of the Taxpayer First Act applies only to disclosures made by the Internal Revenue Service after December 28, 2019, and any subsequent redisclosures and uses of such information disclosed by the Internal Revenue Service after December 28, 2019.”I don’t know of anywhere that it is required in federal regulation, but it isn’t a bad idea. It clearly lets the reader know that the advertisement isn’t a guarantee of a loan and that they must be approved.
There isn’t anything in the regulation that addresses redisclosing for an error like this. It sounds like the loan ID# matches from the LE to the CD so you can identify that the CD matches the corresponding LE. Can the loan still be identified by your institution from information on the CD? If so, I think it is fine.
Each time you make, inrease, extend, or renew a loan you’re required to determine if the property is in a special flood hazard area. You may rely on an existing determination if it isn’t more than seven years old, is on a SFHDF, and there have been no map changes. You’ll want to make sure the life of loan monitoring is extended to cover any modification of the term of the existing loan or to cover a new loan on the same property. You will need to provide a new Special Flood Hazards Notice to the borrower even if you are using an existing determination.
Response by Eric Collinsworth on 1-21-2020:
It is my understanding you will be getting a new appraisal for the new loan. Once that has been done, then it is my assumption you would be renewing that loan annually and you are asking about validating the appraisal you get in 2020 for the real estate. If you plan to renew that loan then validating that report may be sufficient if you determine it to still be valid. There is great flexibility when it comes to validating an existing appraisal and/or evaluation and is left up to the bank to determine if the report in file is still valid. The longest I am aware of that a bank has done that was twice before getting a new appraisal at the third renewal. It will be up to you to determine if that would be sufficient. I suggest at each validation you would want to at least include new photos, discussion of current market conditions and new support (either sales or income data to support the value). If you plan to create a new loan each year though and not renew the existing loan, then it’s very possible an appraisal may be necessary as long as the loan amount makes it a requirement.
Answer by Eric Collinsworth on 1-21-2020:
Good question! Once you have ordered your appraisal, as you renew the loan each year you can decide if a validation will work or if something new is needed. As long as there have been no changes in the market conditions or condition of the property, I would think a validation might be sufficient for a while, but your market will determine how long that would be acceptable. Keep in mind though, that once you determine validation would not be sufficient for that year’s renewal, the minimum required (unless there are any safety and soundness issues that might need consideration) the minimum required would be an evaluation and not an appraisal.
Even if the Homeowners Protection Act doesn’t apply, state law, investor requirements, and your contract with the borrower all could affect if and when you are required to cancel pmi. Although there is not a lot of guidance, my understanding is you would disclose through the time when PMI is required to be terminated.
What is making the loan id # incorrect? Does it meet the criteria below and was the number also used on the CD?
1026.37(a)(12) Loan identification number (Loan ID #). A number that may be used by the creditor, consumer, and other parties to identify the transaction, labeled “Loan ID #.”
38(a)(5)(v) Loan identification number.
1. Same identification number as Loan Estimate. The loan identification number disclosed pursuant to § 1026.38(a)(5)(v) must be one that enables the creditor, consumer, and other parties to identify the transaction as the same transaction disclosed on the Loan Estimate. The loan identification number may contain any alpha-numeric characters. If a creditor uses the same loan identification number on several revised Loan Estimates to the consumer, but adds after such number a hyphen and a number to denote the number of revised Loan Estimates in sequence, the creditor must disclose the loan identification number before such hyphen on the Closing Disclosure to identify the transaction as the same for which the initial and revised Loan Estimates were provided.
