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#1615962 - 10/14/11 05:12 PM Revised Interagency Q&As on Flood
Reads Regs Offline
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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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Flood Compliance
#1616034 - 10/14/11 06:39 PM Re: Revised Interagency Q&As on Flood Reads Regs
Princess Romeo Offline

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I love the part where they say that "Insurable value" is the RCV except for those cases where it isn't.
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#1616057 - 10/14/11 07:06 PM Re: Revised Interagency Q&As on Flood Princess Romeo
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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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#1616083 - 10/14/11 07:30 PM Re: Revised Interagency Q&As on Flood NLC
Princess Romeo Offline

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You might say the new Interagency Q&A just muddies up the waters.

Anyone else see a sliding trend to where lenders will be expected to have borrower's "expressly consent" to being charged for force placement before the 45 days is up AND escrow flood insurance premiums in all cases?
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#1616093 - 10/14/11 07:39 PM Re: Revised Interagency Q&As on Flood Princess Romeo
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Sssshhh Princess Romeo - you will give them ideas! smile
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#1616130 - 10/14/11 08:27 PM Re: Revised Interagency Q&As on Flood Tesla
Dan Persfull Offline
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Bloomington, IN
Quote:
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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#1616164 - 10/14/11 08:57 PM Re: Revised Interagency Q&As on Flood Dan Persfull
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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
Dan Persfull Offline
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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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#1616992 - 10/18/11 05:53 PM Re: Revised Interagency Q&As on Flood Dan Persfull
Lipty Lou Offline
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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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Originally Posted By: Lipty Lou
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
Lipty Lou Offline
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Somewhere in the desert!
Ya, we were wondering if we were going to have to rely on Marshall & Swift more. Thank you!

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#1617348 - 10/19/11 01:29 PM Re: Revised Interagency Q&As on Flood Lipty Lou
NE Wx Forecast - Frosty Offline
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Here's what I want - an agency that can write a decent Regulation to preclude the need for Q&A's. Shows how little they actually know. And they are each getting about $90K/year for it. And that's just the regular admin folks. (GS-12/13). Love it, use RCV unless your case doesn't apply. What?

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#1617375 - 10/19/11 02:02 PM Re: Revised Interagency Q&As on Flood NE Wx Forecast - Frosty
David Dickinson Offline
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If your flood insurance matches the hazard insurance, you'll be fine 99.9% of the time.
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#1617396 - 10/19/11 02:17 PM Re: Revised Interagency Q&As on Flood David Dickinson
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Florida
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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#1617495 - 10/19/11 03:42 PM Re: Revised Interagency Q&As on Flood Cats
NE Wx Forecast - Frosty Offline
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David, can you put my comments in your submission package (assuming you will be commenting on the proposal)? Actually, it's kind of (alot!) harsh, so I suppose I'll tone it down and offer constructive ideas myself.

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#1617506 - 10/19/11 04:04 PM Re: Revised Interagency Q&As on Flood NE Wx Forecast - Frosty
David Dickinson Offline
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I think it would be better for you to submit that. smile

The higher the volume of feedback (not longer feedback), the better.
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#1617563 - 10/19/11 05:05 PM Re: Revised Interagency Q&As on Flood David Dickinson
Princess Romeo Offline

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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.
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Regulations are a poor substitute for ethics.
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#1617613 - 10/19/11 05:53 PM Re: Revised Interagency Q&As on Flood David Dickinson
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PA
Originally Posted By: David Dickinson
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
David Dickinson Offline
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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
David Dickinson Offline
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Central City, NE
Originally Posted By: Princess Romeo
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
Princess Romeo Offline

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Originally Posted By: David Dickinson
Originally Posted By: Princess Romeo
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.
_________________________
CRCM,CAMS
Regulations are a poor substitute for ethics.
Just sayin'

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#1618770 - 10/21/11 07:02 PM Re: Revised Interagency Q&As on Flood Reads Regs
Ninky Offline
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Does the new proposed #62 mean that we could actually forceplace on the 30th day? or do they simply mean we can place GAP insurance and charge the borrower for the 15 days exposed timeframe? I guess that would be way too logical to start at day 30. It's only the Q&A changing not the Act which still sits on 45 days.

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