Renewing loans, property improvements, and flood

Question: We have an agricultural loan that, when made, was secured by unimproved land. The loan is up for renewal next month and we just learned that the borrower has built some agricultural buildings on the property. Should we do a flood hazard determination or is the loan grandfathered because we made the loan on unimproved property and we were not notified about the improvements?

Answer: Flood hazard determinations are triggered by making, increasing, renewing, or extending a loan that is secured by improved real property. When you originally made this loan, the property was not improved. But now it is. You will be renewing a loan and that is a triggering event. So this time, you need to check the flood hazard status of the improvements placed on the property.

Copyright © 2002 Compliance Action. Originally appeared in Compliance Action, Vol. 7, No. 13, 11/02