While at a recent compliance training, the instructor stated that a standard flood hazard determination (SFHD) is required when making, increasing, renewing, and extending a loan. That being said, I know SFHD are good for 7 years. Am I interpreting the regulation that even though the SFHD has a 7 year term if you are making, increasing, renewing, or extending a loan you should still run a new flood determination?
You may rely on a previous determination, for up to 7 years, using the SFHDF when you are increasing, extending, renewing, or purchasing a loan secured by a building or a mobile home. However, the "making" of a loan is not listed as a permissible event that permits you to rely on a previous determination. So if the bank is increasing, renewing, and extending credit, then it is possible that you may rely on a previous determination using the SFHDF as long as 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 SFHDF, and there were no map revisions or updates affecting the security property since the original determination was made. However, you must obtain a new determination using a new SFHDF, when "making" a loan. See Question and Answer number 68 from the 2009 Interagency Questions and Answers Regarding Flood Insurance https://www.federalregister.gov/d/E9-17129/p-443.
Is HVCRE collateral driven or purpose drive? For example, if the bank does an equity out loan to purchase land, and the land being purchased will not be the bank’s collateral, would this loan still qualify as HVCRE, since the purpose of the loan is to purchase the land?
First, to qualify for an HVCRE, it would be purpose driven to determine whether or not ADC applied. HVCRE technically covers the "acquisition, development OR construction" (ADC) of commercial real estate, so it's possible that purchasing land might still fall under the HVCRE risk weighting. However, if the loan is solely for the purpose of developing agricultural land, then it would also be exempt, per the regulation.
The complete definition of HVCRE can be found here: https://www.fdic.gov/regulations/laws/rules/2000-4350.html.
However, the exemptions are what would bring collateral in to the equation. HVCRE exceptions include:
1. ADC (acquisition, development, or construction) loans for 1-4 family residential properties, including loans secured by land for developing or constructing 1-4 family residential properties, and loans to finance the acquisition of lots zoned for 1-4 family residential properties;
2. ADC loans for real property that qualifies as community development investments; and
3. ADC loans for land used for agricultural purposes.
CA does offer a High Volatility Commercial Real Estate (HVCRE) Summary of the most frequently asked questions in effect of having HVCRE in bank portfolios.
Is an environmental questionnaire required to be completed on residential real estate taken as collateral for commercial loan purposes?
There's not a federal regulatory requirement for residential properties- that relates to commercial property. Typically environmental questionnaires or surveys are only needed for commercial real estate. There may be a rare case in which the title company is requesting an environmental questionnaire to be completed, but I would consider that out of the ordinary.
Use of an environmental questionnaire isn't required under the federal consumer compliance regulations. That being said, you may want to consider obtaining such information to ensure that you're properly managing any environmental concerns from a safety and soundness standpoint. Since environmental liability is governed by state law you'll want to consult with local counsel should you decide to use such a questionnaire.
As stated in the FDIC's environmental Guidelines, "loans collaterized by 1- to 4-family residences normally have less exposure to environmental liability than loans to finance industrial properties."
A copy of the FDIC policy for Environmental Standards can be found on the FDIC's website, here:
CA also does offer our Environmental Risk Procedures here which may prove helpful: https://www.compliancealliance.com/find-a-tool/tool/environmental-risk-procedures
Does it violate Regulation B (ECOA) to predetermine that all fixed rate loans made to individuals over the age of 60 will be sold on a secondary market?
Yes. While Regulation B does not specifically mention selling loans on the secondary market, the official interpretation to the regulation defines its scope to include all dealings between applicants and creditors, including the administration of accounts.
Age is included in the list of prohibited bases, and selling a loan on the secondary market is an administrative matter.
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