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#1420288 - 07/27/10 04:33 PM Penalties
Anonymous
Unregistered

OK...in researching penalties for flood violations, I can only see an amount of $385 per violation not to exceed $125k in one calendar year. This is from 2004 and it says they can be adjusted for the cost of inflation.

Can anyone please tell me if the amounts above are still correct or what the amounts are now and where I can find them?

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#1420395 - 07/27/10 06:24 PM Re: Penalties Anonymous
Reg Wrecker Offline
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Reg Wrecker
Joined: Dec 2003
Posts: 543
Kentucky
Also, what if we make a loan that we only take the land as collateral and not the building...if it is in a flood zone, would insurance be required then even though we are not using the building as collateral?

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#1420397 - 07/27/10 06:27 PM Re: Penalties Reg Wrecker
Dani York, CRCM Offline
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Dani York, CRCM
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Posts: 3,663
TN
Qtip---Did you specifically exclude the building (and the land it sits on) from your legal description when you filed your deed? (This would require a survey). If you specifically excluded it from the deed, then no flood insurance would be required. If you didn't exclude it from the deed, then you must have flood insurance.

Anon--To my knowledge the penalty numbers have not changed. I believe it is still 385.00 per violation not to exceed 125,000.00 in one year.
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#1420412 - 07/27/10 06:52 PM Re: Penalties Dani York, CRCM
Reg Wrecker Offline
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Reg Wrecker
Joined: Dec 2003
Posts: 543
Kentucky
Dani, still looking into that part...waiting on the mortgage to be scanned for me to review. In this particular case, I have a policy that is showing flood coverage; however, I'm not thinking it will be sufficient.

Thanks
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#1420618 - 07/27/10 11:11 PM Re: Penalties Reg Wrecker
Way Out West Offline
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Way Out West
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San Francisco
Every time I have ever called FEMA with a question, their advice always included something about taking the land as collateral but excluding the building. And it always sounded to me like advice coming from someone who had never made an actual loan in the real world.

I cannot for the life of me figure out how one could re-jigger one's loan docs to exclude a building but still retain a valid lien on the land. And what happens if, heaven forbid, you have to foreclose on the loan? Do you really want to end up with title to the land but not the building sitting in the middle of it?

Personal opinion: this sounds like a bad idea all around. If you truly want to avoid flood insurance, do the loan unsecured. If you don't want to take the risk of doing the loan unsecured, then why would you want to take the risk of doing a loan secured by the land but not by the building?

And to answer the original question: Yes, the civil money penalty for flood violations is still $385 per.
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#1420628 - 07/28/10 10:50 AM Re: Penalties Way Out West
rlcarey Online
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rlcarey
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Galveston, TX
This usually is only worth the trouble if you have a structure of very nominal value and if you can do it under State law.
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#1420633 - 07/28/10 11:54 AM Re: Penalties Way Out West
Kathleen O. Blanchard Offline

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Kathleen O. Blanchard
Joined: Dec 2000
Posts: 21,281
Originally Posted By: Way Out West
Every time I have ever called FEMA with a question, their advice always included something about taking the land as collateral but excluding the building. And it always sounded to me like advice coming from someone who had never made an actual loan in the real world.

I cannot for the life of me figure out how one could re-jigger one's loan docs to exclude a building but still retain a valid lien on the land. And what happens if, heaven forbid, you have to foreclose on the loan? Do you really want to end up with title to the land but not the building sitting in the middle of it?

Personal opinion: this sounds like a bad idea all around. If you truly want to avoid flood insurance, do the loan unsecured. If you don't want to take the risk of doing the loan unsecured, then why would you want to take the risk of doing a loan secured by the land but not by the building?

And to answer the original question: Yes, the civil money penalty for flood violations is still $385 per.

The other alternative (usually only possible for commercial loans) is for the client to pledge other assets as collateral: real estate not in a flood zone, or any other acceptable asset. If there are no other assets available, then get flood insurance.
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