Q: Is it possible to rely upon a previous flood determination?

A: Yes.

WBA has received numerous calls regarding the new private flood insurance rules. This has also triggered questions related to other components of the flood rules. One common topic is that of prior flood determinations. It is possible to rely on a previous determination for a refinancing or assumption of a loan to the same borrower secured by the same property under certain circumstances.

On July 1, 2009 the prudential federal regulators joined to issue guidance on loans in areas having special flood hazards, including a question and answer. This Q&A was published in the Federal Register Vol. 74, No. 138. Within that publication, Q&A 68 provides that bank may rely on the previous determination only 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 Standard Flood Hazard Determination Form, and there were no map revisions or updates affecting the security property since the original determination was made. 

Specifically:

"Reliance on previous determination: Any person increasing, extending, renewing, or purchasing a loan secured by improved real estate or a mobile home may rely on a previous determination of whether the building or mobile home is located in an area having special flood hazards (and shall not be liable for any error in such previous determination), if the previous determination was made not more than 7 years before the date of the transaction and the basis for the previous determination has been set forth on a form under this section, unless—

(1) map revisions or updates pursuant to section 4101(f) of this title after such previous determination have resulted in the building or mobile home being located in an area having special flood hazards; or

(2) the person contacts the Administrator to determine when the most recent map revisions or updates affecting such property occurred and such revisions and updates have occurred after such previous determination."

One common question associated with the Q&A is how map revisions or updates affect the potential for usage. Generally speaking, a bank may not rely on a prior determination If FEMA's map revisions or updates show that the security property has been remapped into an SFHA.

For additional guidance consider page 6 of the FDIC handbook: www.fdic.gov/regulations/compliance/manual/5/v-6.1.pdf

And the July 1, 2009 Q&A: www.fema.gov/media-library-data/20130726-1742-25045-4927/interagency_q_a.pdf

Birrenkott is WBA assistant director – legal. For legal questions, please email wbalegal@wisbank.com.

Note: The above information is not intended to provide legal advice; rather, it is intended to provide general information about banking issues. Consult your institution's attorney for special legal advice or assistance.