Q: How often is the determination of flood zones performed?
A: A determination should be performed whenever a lender makes, increases, extends, or renews a loan secured by real estate.
Regarding the Standard Flood Hazard Determination form, the NFIP Mandatory Purchase of Flood Insurance Guidelines (page 37-38) states:
A previous determination may not be reused when making a new loan. If the loan is not new, i.e., if the transaction pertains to increasing, extending, renewing, or purchasing an existing loan, the determination can be reused if:
• It is less than 7 years old; and
• No new or revised FIRM or FHBM has been issued in the interim; and
• It was initially recorded on the SFHDF.
If a borrower obtains a home equity or second mortgage from its first mortgagee that is secured by a secondary lien position, and provides evidence that adequate flood insurance coverage is in place for all loans, the lender can rely upon the original SFHDF if no remapping has occurred. The regulators will impose no penalty if the prior determination meets the above requirements. Once a new map has been issued, a lender must use that map as a guide, and a new determination is required for a triggering event. Any disputes that arise between the lender and borrower concerning the location of a building in relation to an SFHA are eligible to be resolved in accordance with the review process described on pages 14-19.
– This Q&A was included in the materials from the FDIC New York Region Regulatory Teleconference: “Flood Insurance – Flood Insurance Compliance and an Examiner’s Perspective” which took place on December 3, 2012. These materials may be found here: https://www.fdic.gov/news/conferences/NY/2012-12-03.html