We have a loan in which the appraisal gives a
"replacement cost new" and a "replacement cost new less depreciation."

What value do I go with?

I found my answer if anyone has a similar question:

A lender may determine RCV by using the RCV from the hazard insurance policy, from an appraisal based on the cost-value-before depreciation approach

Replacement cost less depreciation would be actual cash value which is what you would use for non owner occupied buildings.

Thanks for the clarification:

RCV on residential
ACV for non-residential

Correct???

Correct.

Can you point me to where is states ACV for non-residential? I need to be able to cite this to our lending staff.

Also, what if we have multiple buildings (a home and an outbuilding) do we have to have separate policies for these two structures. I'm thinking we do as one would be residential and one is non-residential. Is this correct?

Can't answer your first question, but to answer the second, each building must have their own policy. It wouldn't matter if both were residential or if both were non-residential. Each building must have its own.

Sugarbaker, you would actually have to find that in the Insurance Manual..the ones the insurance agents go by. The Q&A's have never clarified value.

by utilizing all resources, you will find that the insurance cmpany will only pay out based on RCV-owner occupied properties and ACV on non-owner occupied properties.

This is not limited to non-residential...it could be residential but not OO.

Because the FEMA rules caution lenders against over-insuring...this is the stance I'd say a majority of us take. Again, you have to go to the insurance company NFIP manual.

You'll find the coverage (RCV or ACV) and it's limitations in the policies. Compare a dwelling policy and a non-dwelling policy.

Let me add to what Joker stated:
RCV is only paid on single unit dwellings, that are the principal dwelling (occupied 80% of the last 365 days) AND that is fully insured (80% insurance to value). Otherwise, it pays ACV.

David, does that mean on a duplex, for instance, inwhich the borrower lives in one unit...they can also only be paid on loss based on ACV?

If so, I hadn't carried it out that far so thanks in advance for that tidbit!

Can anyone advise what would be required then in the case of a mortgage that was done prior to 9/1/2007 and is for a single family rental home that obviously is non-owner occupied.

Our loan has other non-flood properties as collateral and totals $288,650. Our flood property has an appraisal dated 2004 that lists the value less land as $52,000(used because the mortgage/note is pre-RCV in 2007). The flood insurance shows an RCV of $52,000 but the dwelling coverage is only $48,400. Someone checking the insurance thought the $52,000 was addt'l coverage. Are we in trouble?

You do not need to do a new valuation, unless you make, increase, extend or renew the loan. If the value of the improvements is $52,000 and you have flood insurance of $48,400, then you need more insurance. If this was set up that way, it was wrong from the beginning and you need to correct it by notifying the borrower and begin force placement procedures.