If we have a blanket lien that includes leasehold improvements (but not the building, as it is leased), would the loan be subject to flood insurance requirements? I have read some definitions that define leasehold improvements as real property.

What are the leasehold improvements?

If you have leasehold improvements as collateral, I'm not sure how you would have the land underneath them?????

It's for a lending product under investigation - the leasehold improvements could include anything from cubicles to drywall, carpeting, etc. Some leasehold improvements seem to fit the definition of real property (at least for tax purposes), so I wanted to make sure a blanket lien on such items wouldn't fit the definition of a "loan secured by improved real estate" even though the land is not owned by the borrower.

I don't believe you need to comply with the flood insurance requirements unless you have a security interest in a walled and roofed structure. Doesn't sound like you have that.

It's for a lending product under investigation .......

If you have ever tried to foreclose on a leasehold improvement, your investigation would be already over if that is going to be your only collateral.............

By the way, cubicles are not leasehold improvements - they are movable....

Thank you.

Does anyone know if a grain bin / dryer combo on a cement slab would be considered leasehold improvement? Our situation is the borrower owns this big section of land but leases a portion of it to a company that placed the grain bin / dryer structure on it. The grain bin structure is in the flood zone. We're trying to take the whole section of land and not have to exclude the part that's leased. We only want a mortgage, no UCC for anything else. Our borrower isn't the owner of the structure. I don't see how the borrower would have an insurable interest and I don't think we should need flood insurance. Anyone?

A grin bin is a "building" and is insurable.

I agree it's a building; my question is if the borrower doesn't own it and he leases the property someone else who does, does our borrower have an insurable interest? He has no ownership of the "building."

If you foreclose on the property, do you have the grin bin as collateral? If not, you don't have a covered loan. If so, you need to comply with the FI requirements.

Thank you.

We have a similar situation in which we have a leasehold mortgage on the items inside a building but do not have a lien on the actual building (or the dirt) because our borrowers just lease it. Can someone give me specific guidance to point towards why we do/don't have to require flood insurance on the building?

If you don't have a building as collateral, you don't have a "covered loan". Flood insurance doesn't apply. See Interagency FAQ #39.