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#198819 - 06/09/04 08:53 PM Flood refresher
Anonymous
Unregistered

I have been out of lending for a year or so and I wanted to make sure I remembered correctly, or if the "rules" have changed. Here is my situation

Bank A has a loan for $45k, collateral is a mortgage on a 1 acre plot. The plot has 4 buildings, a mobile home, a restaurant, a store, and a storage unit. The appraisal is for $172,000, but does not breakdown the value of the land nor the value of each building. The only flood coverage in the file is for $80,000 on the mobile home. Bank A has enough insurance dollar wise but that amount needs to be appropriated to each of the structures. Correct???

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Lending Compliance
#198820 - 06/09/04 10:39 PM Re: Flood refresher
David Dickinson Offline
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David Dickinson
Joined: Nov 2000
Posts: 18,762
Central City, NE
Since the loan is for $45,000 and you have flood insurance in excess of that, you have enough flood insurance. However, I would want to know which buildings are specifically in the Special Flood Hazard Area, what the value of each is, etc.

I don't think you have a violation though.
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David Dickinson
http://www.bankerscompliance.com

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#198821 - 06/10/04 02:27 PM Re: Flood refresher
Dan Persfull Offline
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Dan Persfull
Joined: Aug 2002
Posts: 47,517
Bloomington, IN
Quote:

I don't think you have a violation though.





I would agree providing the MH is the only structure within a SFHA. However, you must have each structure within a SFHA covered under a separate NFIP policy. Therefore if all four structures are within the SFHA there should be 4 NFIP policies, possibly only 3 if the storage shed can be considered an extension of one of the other structures.

From page 33 of the Mandatory Purchase of Flood Insurance Guidelines:

Only one building may be insured under one NFIP policy. Each building securing a loan must be covered by a separate NFIP policy.

Although you may have adequate coverage on the MH, you may not have coverage on the other structures.

David's comment about determining which structures are within a SFHA is very crucial in what action you may need to take.
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The opinions expressed are mine and they are not to be taken as legal advice.

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#198822 - 06/10/04 03:07 PM Re: Flood refresher
Anonymous
Unregistered

Thanks for the affirmation,

All four buildings are in the SFHA, about 1/2 acre plot near the river, so all four need insurance. The storage shed was probably the wrong term it is more of a storage shop, it is a 1000 sq ft metal bldg.

Thanks for the help!

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