I'm reviewing a loan for adequate flood insurance and I'm looking at the appraisal for the RCV however this is an older mobile home and the appraiser did not consider the Cost approach.

What else is acceptable to use in this situation?

their insurance should have RCV.

Yes, default to your insurance unless you have the comparable NADA for mobilehomes over there.

O.k. got another question. What if there is no Hazard Insurance in the file to get the RCV?

I'm finding absolutely nothing in the file with any kind of value listed. This is so frustrating!!

I feel your pain!

How about calling whoever you use for forceplacement insurance and see if they can run a quote for you.

Joker, are you talking about getting a RCV quote from the Hazard Insurance Company?? I have a flood policy in the file but I'm just trying to determine if it is adequate coverage but couldn't find anything in the file to calculate the minimum this customer needs. Just want to make sure I'm following you.

Thanks

Do you use a particular company you use to force place flood insurance, or do you use whatever company the borrower originally used?

Since you have a flood policy in file...why not call them and see how they arrived at the coverage amount...they may be able to supply you with an appropriate value.

Sounds good to me!! Thanks!

Had an insurance company tell me yesterday morning they just write the flood policy by what the loan amount is going to be.

It's a simple approach, I guess...but the problem lies in over-insurance if the RCV/ACV is even lower...the policy won't pay and FEMA has strong opinions on that.

Looks like to me that would be fraud because the building may be worth $10,000 but the loan amount may be $50,000 but they may have additional collateral on the note to justify loan to value but I don't see how the flood insurance could be justified.

I agree with you Joker that FEMA as well as FDIC would have some strong opinions about that.

You also make a good point - in reverse!

I e-mailed the following question to the FDIC for a response:

I am reviewing a loan for adequate flood insurance. There is an appraisal however the appraisal only has the Sales Comparison Approach. This is a non-owner occupied dwelling so I need the ACV (Actual Cost Value which is the RCV less the depreciation). If I don’t have that information how do I calculate the amount of coverage I need?

Here is the response I received:

I asked a couple of examiners your question and I also mentioned that I don’t think you have the replacement cost value for insurance because for some reason I think you mentioned that before (but I don’t trust my memory these days) . These are the two responses I received. I just cut and pasted their responses. I looked and couldn’t find anything else either:

1)If they don’t have any of that information then I would say they need the lesser of $250,000 or the loan amount. Sometimes the homeowners’ insurance policy has the RCV.

2) I would look to see what the Replacement Cost value is from the hazard insurance. But like you said, if that is not available, I am not sure how it could be calculated. Sorry that I can’t be more helpful.

lds...sometimes you just have no choice but use the best info you have...even if it's from the tax card. At least you can separate out the parts and pieces with that. It's not the perfect solution...but trust me...I've used it in my process a bazillion times when all else fails.

It just goes to show, you need to pick an approach and document your decision on what your institution thinks the appropriate amount should be. On a go forward basis, I would highly recommend that you always pull your FHD prior to the appraisal ordering process so that you can request a cost approach to be included in the appraisal.

Randy, I agree that is the best approach...no doubt...and I've written memos to that very effect. In the real world, however, it just doesn't happen that way.

It's such a simple solution...but it just doesn't happen. I think LO's are wired wrong.

Wonder if I will ever not get so strung out on this stuff?? Seems like the more you dig into something the more confusing it gets!!

I'm going to send that memo out Randy but like Joker said, these loan officers are just wired differently. It would make life for me a lot simpler if they would get the determination and review it first then order the appraisal because then they would know what information they need included in the appraisal.

Thanks for all your help guys!!

Randy, I agree that is the best approach...no doubt...and I've written memos to that very effect. In the real world, however, it just doesn't happen that way.

Then I would but most of the blame on management if they don't think this is important enough to put any teeth in policy. Since loan officers should not have any input in the ordering of appraisals, the person/department charged with ordering appraisals should not order any appraisal until a FHD is included with the appraisal request.

If you can't get management to buy into this, then they need to know that the chips will fall where they may.

Randy, around here most 1-4, in particular, appraisals/evals are done in house...they are bare bones at best. We often don't and won't have the cost values, regardless.

I'm always THRILLED when I get cost numbers...they are a treat!

Ain't that the truth, Joker!! If I got a file that has everything in it that I need I go through it 4 or 5 times to see if I missed something!!

I'm usually doing good to get a copy of a tax record to use.

Do appraisers typically charge more to include this value? If so, how much?

You would have to ask them.

We are in the process of doing that. Just thought I'd try to find out what others were seeing in case they come back with high numbers.

I see a lot of appraisals and I actually really don't see much of the difference in price.