Have you ever gotten into a debate about the 7-year rule? You’re not alone! The seven-year rule has created confusion among lenders and servicers alike. Some mistakenly believe they must order a new flood zone determination every seven years for properties in their loan portfolio. It’s a common misconception — and one worth addressing, especially as regulatory expectations evolve and portfolios grow more complex.
So, let’s break it down.
The rule stems from the National Flood Insurance Reform Act of 1994, specifically 42 U.S.C. § 4104b(e). It allows lenders to reuse a previous flood determination under certain conditions, provided:
These guidelines are reinforced by the Interagency Questions & Answers Regarding Flood Insurance, a joint compliance resource from federal banking regulators and FEMA.
The rule applies when the same lender makes multiple loans to the same borrower on the same property. However, if a different lender is involved in the refinance or assumption, a new flood determination is always required.
It depends.
If you’re using a Life of Loan (LOL) tracking service, you're already covered. Life of Loan monitoring tracks FEMA flood map changes over time and alerts the lender if a property’s flood zone status changes. When that happens, the service automatically issues an updated flood certificate.
This ensures your loan portfolio remains compliant with federal flood insurance regulations — without unnecessary reordering of flood determinations every seven years. It also helps mitigate risk by identifying when a property is newly placed in a Special Flood Hazard Area (SFHA), allowing lenders to take timely action.
These updated certificates are also valid for use during refinancing and loan assumption, provided the original lender is still involved.
AFR recommends that if a lender chooses to rely on a prior determination, they note the loan file as such so auditors or examiners have a clear understanding of how the flood status was determined.
As a best business practice, many lenders choose to order a recertification of a prior determination from AFR at a discounted fee, so that their process stays consistent in always requesting a flood determination when it increases, extends, renews, or purchases a loan secured by a building or a mobile home located in a SFHA (100 year floodplain).
Since 1992, AFR Services has been the trusted partner for more than 1,500 lenders nationwide, offering:
Lenders large and small rely on AFR for a flood compliance program built on accuracy, automation, and accountability.
Request a demo today to see how AFR Services can support your team.