We have an external source that we use for compliance review. They are dead set that the flood must me PULLED 10 days prior to close.

I have run out of air defending this. I totally understand that if it is in a flood zone, then yes "...a notice must be sent within a reasonable time(10 days is suggested - but I don't see that it is a regulation)…perhaps banking policy should state the 10 requirement.

However, if it is not in a flood zone, then does it really matter if the flood was pulled 3 days before closing. I totally understand if it was in a flood zone then you could have a timing issue.

I have asked external compliance reviewer to school me on their recommendation because I am definitely open to learning. I am generally cut short and given a finger-shaking from others with a reminder that I am not the one that sits in front of examiners on compliance exam.

I think what they're saying is goofy.......a closing date can be a fluid thing....if you pull on 8-14 and it's not in a flood zone, you may well close on 8-15. If you pull on 8-14 on a purchase loan, and it IS in a flood zone, then there's almost no way that you would close on 8-15. So it's not as if from the day of application you have a closing date sighted out in the distance and can say "well, we're 10 days away from closing, time to pull the flood determination". I'm with you on this.

Now having said that, i can see the argument for pulling the flood determination prior to ordering the appraisal--because if it's in a special flood hazard area, you'll want to engage the appraiser to include a cost approach (if they don't always do so).....but that's not because of some timing rule about when flood determinations have to be pulled, but more of making sure that you don't end up with an appraisal that can't help you determine RCV and ACV as needed. Just my two cents.

I would suggest that you always pull prior to ordering an appraisal for the reasons that raitchjay points out. Waiting until 3 days prior to closing is ridiculous in my mind. The idea is to give the borrower adequate time to obtain insurance (if required). On a purchase transaction, if they are not already aware that the property is in a flood zone, they may even decide not to pursue the transaction (I have seen this happen).

Not to mention, if the loan is subject to TRID:

The “reasonably available” standard requires that the creditor, acting in good faith, exercise due diligence in obtaining information.

Waiting until the loan is almost closed to inform the borrower of the additional closing costs required if flood insurance is required, in my mind, is not exercising due diligence.

I actually had this argument with an examiner several years ago. She insisted that there must be at least 10 days between the flood cert and closing. I argued that while that is perfectly reasonable for purchase loans or even refis from another lender, that it was ridiculous to make a current customer wait 10 days on an in-house refi - especially commercial loans. We often handle those next-day or even same day when we aren't getting a new appraisal. She finally called her supervisor and was told to back down because I was correct. But dang did she dig hard for something else to get me on!

As you know there is no rule that says when the SFHDF has to be pulled. However, there is a logical approach that says do it as soon as possible. - which raitchjay and Randy explained. Plus, you might think it's not in a SFHA but you're wrong. Now you're holding up everything because you must give the Notice a "reasonable" time before closing. I will also attest that most examiners will tell you "reasonable" is at least 10 days prior to closing. You can argue this all you want (& I have too), but they aren't budging.

With all of that said, why not order the SFHDF as soon as possible? What's your reasoning for wanting to wait?

Is not getting the determination prior to loan origination a violation? I see that the regulation requires the standard form, and if the property is in a SFHA then violations have occurred. But is it a violation when the cert gets pulled after origination? Luckily the property is not in a SFHA, but is this a violation or procedure noncompliance?

I think the phrase "collateral security for a loan is or will" says it all.

(f) Required use of standard flood hazard determination form—(1) Use of form. A state member bank 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.

This is from page 34 of the 2007 Mandatory Purchase of Flood Insurance Guidelines (which has been retired)

A lender also must complete the SFHDF
(see Appendix 3, Standard Flood Hazard
Determination Form) prior to concluding
loan processing.