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#1615962 - 10/14/11 05:12 PM
Revised Interagency Q&As on Flood
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Diamond Poster
Joined: Nov 2004
Posts: 2,307
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I just got an e-mail from the FDIC that announces updated interagency Q&As on flood. They are also proposing some Q&As. There will be a 45 day comment period once the document is published in the Federal Register. http://www.fdic.gov/news/news/press/2011/pr11163.html
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Opinions expressed are my own and not necessarily those of my employer. They are not legal advice.
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#1616057 - 10/14/11 07:06 PM
Re: Revised Interagency Q&As on Flood
Princess Romeo
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Gold Star
Joined: Jun 2005
Posts: 287
Center of US
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Yep clear as mud. Guess you can use any insurable value as long as you document it???
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#1616093 - 10/14/11 07:39 PM
Re: Revised Interagency Q&As on Flood
Princess Romeo
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Power Poster
Joined: Nov 2003
Posts: 3,726
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Sssshhh Princess Romeo - you will give them ideas!
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#1616130 - 10/14/11 08:27 PM
Re: Revised Interagency Q&As on Flood
Tesla
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10K Club
Joined: Aug 2002
Posts: 47,517
Bloomington, IN
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AND escrow flood insurance premiums in all cases We do this now and you won't believe the time, effort and headaches it has saved us in maintaining flood insurance. The only force placement we deal with now are a couple of commercial loans that we have fought for some time but I think I have Sr. Mgmt. convinced to force them into escrow when the current loans come up for renewal. I would welcome mandatory escrow for flood insurance regardless.
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The opinions expressed are mine and they are not to be taken as legal advice.
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#1616164 - 10/14/11 08:57 PM
Re: Revised Interagency Q&As on Flood
Dan Persfull
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Gold Star
Joined: Mar 2011
Posts: 335
Kansas
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Q&A 62 states that the agencies encourage institutions to explain their force-placement policies to borrowers. Do you think in the future that we may be required to give borrowers a force placement disclosure at loan closing?
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#1616181 - 10/14/11 09:16 PM
Re: Revised Interagency Q&As on Flood
Patricia
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10K Club
Joined: Aug 2002
Posts: 47,517
Bloomington, IN
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If this is addressed to me I haven't read the revisions yet but I could see that as a possibility but I would also suspect it would take a change in the law to mandate such a disclosure.
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The opinions expressed are mine and they are not to be taken as legal advice.
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#1616992 - 10/18/11 05:53 PM
Re: Revised Interagency Q&As on Flood
Dan Persfull
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Member
Joined: Sep 2009
Posts: 87
Somewhere in the desert!
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Anyone have any ideas on #9?
How do we calculate the amount of required flood coverage for commercial property taking actual cash value into account?
Muddy, Muddy, Muddy!!! (Ack)
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#1617019 - 10/18/11 06:29 PM
Re: Revised Interagency Q&As on Flood
Lipty Lou
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100 Club
Joined: Jan 2010
Posts: 192
Florida
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Anyone have any ideas on #9?
How do we calculate the amount of required flood coverage for commercial property taking actual cash value into account?
Most of the insurance companies will use Marshall & Swift or a similar system which will calculate both the replacement cost AND the depreciated value of a property. Most of the insurance agents will forward you a copy of it for your file if you need it.
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#1617087 - 10/18/11 07:23 PM
Re: Revised Interagency Q&As on Flood
Cats
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Member
Joined: Sep 2009
Posts: 87
Somewhere in the desert!
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Ya, we were wondering if we were going to have to rely on Marshall & Swift more. Thank you!
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#1617396 - 10/19/11 02:17 PM
Re: Revised Interagency Q&As on Flood
David Dickinson
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100 Club
Joined: Jan 2010
Posts: 192
Florida
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That works for residential, but not on commercial. In my neck of the woods, the insurance agencies will not write the policies for RCV because they know the policy will only pay out ACV. Their point is that if they require higher premiums for coverage they KNOW the borrower can never receive, that's insurance fraud on their part.
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"There should be a critical duration time after which it is perfectly acceptable to bite someone like a raptor." D. Shepherd
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#1617613 - 10/19/11 05:53 PM
Re: Revised Interagency Q&As on Flood
David Dickinson
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Platinum Poster
Joined: Feb 2003
Posts: 962
PA
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If your flood insurance matches the hazard insurance, you'll be fine 99.9% of the time. What about the part in Q&A #9 where "insurable value for flood insurance purposes may differ from the coverage provided by the hazard insurance and that adjustments may be necessary: for example, most hazard policies do not cover foundations"? Shouldn't we be adjusting the RCV on the hazard policy to increase the required coverage amount to account for the foundation? And if we are, how do we calculate and support this adjustment amount?
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#1617712 - 10/19/11 07:34 PM
Re: Revised Interagency Q&As on Flood
AuditorK
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10K Club
Joined: Nov 2000
Posts: 18,762
Central City, NE
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I'm very familiar with how hazard insurance doesn't cover foundations. In fact, I wrote an article on Insurable Value (you can find it here: http://www.bankerscompliance.com/compliance-resources/free-downloads.htm) and discussed this in the last paragraph on the first page. However, I've not found an examiner yet that understands this. In fact, I haven't run into an examiner yet that has questioned a bank when the flood insurance matches the hazard insruance. As you ask "how do we calculate and support this adjustment"? It's rocket science to try to calculate it - although I can't argue it's not needed as flood typically hurt foundations while fires/tornadoes/etc. don't.
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#1617717 - 10/19/11 07:36 PM
Re: Revised Interagency Q&As on Flood
Princess Romeo
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10K Club
Joined: Nov 2000
Posts: 18,762
Central City, NE
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How about agricultural buildings? Try figuring out the "insurable value" of a tin storage shed at the far end of a corn field and then try to keep a straight face when you tell the borrower that yes, they need to get flood insurance on it. Again, use the amount of hazard insurance the owner has placed on the building.
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#1618180 - 10/20/11 04:57 PM
Re: Revised Interagency Q&As on Flood
David Dickinson
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Power Poster
Joined: Jun 2001
Posts: 8,272
Where the heart is
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How about agricultural buildings? Try figuring out the "insurable value" of a tin storage shed at the far end of a corn field and then try to keep a straight face when you tell the borrower that yes, they need to get flood insurance on it. Again, use the amount of hazard insurance the owner has placed on the building. It's not covered on their hazard insurance. So, with a straight face, the Bank gets to tell their customer they need to insure the tin shed for the amount it would cost to demolish it. Really. And I mean, really.
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