We currently use FIS for flood determinations and when we get the determination, it comes in two pages - page 1 is the determination itself and page 2 is the Notice to Borrower (which indicates whether they are in a flood hazard area and also whether the property is located in an NFIP participating community).

We are considering switching to a Trans Union flood product, which does not come with page 2 UNLESS the property is in a flood zone.

I have always been told that the borrower should receive the Notice to Borrower regardless of whether ot not they are actually in a flood zone because it indicates whether the property is located in an NFIP participating community.

Is the Notice to Borrower required to be provided and signed if the property IS NOT located in a flood zone?

No.

Thanks Dan!

With the flood Notice, I believe that TransUnion has 3 options:
1 - send it all the time
2 - send it when the property is in a SFHA
3 - never send it.

Most banks use option 2.

At a prior bank, we were advised by our compliance consultant, after an exam, to stop giving the form to customers unless they were in a flood zone. We used FIS, also.

I'll say I'm shocked that a consultant would advise against giving it unless in a zone. If you'll take the time to read the document, it offers some extremely good information and information regarding what will happen in the future if the property is later determined to be in a designated zone. It also advises that, although you may not be in a DZ...you could still be in a 500-yr/C, etc-type zone and might wish to consider the insurance or speak with an insurance agent for advice or something along those lines.

We used to not give it unless in a DZ...the FRB recommended giving it in all cases. I stopped long enough to read it...and now understand why the recommendation was given...it's a good thing to do, IMHO.

I heard an ABA attorney advise not to give the notice unless the property is in a SFHA and I agree for several reasons:

1. What if you're wrong? It would be an issue that you didn't give them the notice, but you also gave them a written disclosure that indicated the property was not in a SFHA!

2. Don't borrowers get enough disclosures already? That's one of our primary issues today - over disclosure. The law doesn't require any type of notice unless they are in a SFHA. Why would you want to give them more?

3. Who really reads any of the disclosures anyway?

And this is where I agree to disagree on this:

#1 - You, the lender, are ultimately responsible whether you were right or wrong. However, if you give them the Notice...you put them on Notice that if something changes, you can require and force-place if necessary.

In addition, if you are in, say, Zone C...it cautions you that you may want to seek counsel regarding the advisability of having insurance anywa, even though the lender is not "making" you get it...Whose to say when the 500-yr flood might come your way! Look at the US now...some of those folks probably would have never even thought they might need insurance. Would it help if they did?

#2 - no argument there! (to sentence one, anyway! )

#3..ME

I agree with you both.

BUT, we are regulated by the FRB and we've always provided it in the past whether they were in a SFHA or not. I would bet they suggested it a long time ago and that's why we still do it and why they've never told us to stop doing it.

Perhaps when they are here next time, I'll ask them about it.

Thanks!

As I recall, the primary reason we stopped giving them is we were criticized in the exam for having the customer's sign them when they weren't required. Hence, the answer was to stop giving them out unless required.

You are quite the dipmomat! Are you sure you don't want to run for President!!!!

LOL!

I agree that we shouldn't have to bother if they aren't in a SFHA, yet I agree that the notice contains relevant information that would benefit the consumer.

When it all comes down to it....it's our examiner's opinion that really matters!

Isn't that the name of the game anyway?

This was a good discussion...thanks to all for their input...and to think, I wondered if it would catch any attention.

Not if that opinion is not based on a regulatory requirement and they attempt to cite you based on their opinion and not on the regulatory language.

I agree it has good information but it is not required by regulation.

"As I recall, the primary reason we stopped giving them is we were criticized in the exam for having the customer's sign them when they weren't required."

Such a finding has no place in an audit or examination.

I also might have to take issue with David's opposition, and I very seldom do this. I think there are a few scribblings on the wall with the last round of flooding in the midwest. If you are wrong, you are wrong. A notice one or the other is not going to further jeopardize the bank.

You are starting to see comments like this: "We do our best to advertise the availability of flood insurance and encourage people to purchase it," said Terry Reuss Fell, regional chief of FEMA's floodplain management. "We implement the laws that are given to us and the laws right now deal with the floodplains management within that 100-year floodplain and the insurance purchase requirements in that area also."

and these:

"They all told us, `The levees are good. You can go ahead and build,"' said Parks, who did not buy flood coverage because her bank no longer required it. "We had so much confidence in those levees."

"We thought we would need flood insurance to get the mortgage," Gwinn said. "But the bank told us we were exempt."

I already see the writing on the wall. I would not criticise or even mention as a best practice to discontinue a notice that the property is not in a flood zone, but that insurance is available and the borrower is encouraged to assess their risks carefully.