We have a loan officer that is adamant that the customer does not need flood insurance for this situation:

We ran a flood cert on the property in question and the company came back with an answer of "Yes" it's in a flood zone. The survey we have that was done on May 18, 2012 shows that the flood zone line is just outside of where the buildings (cabins, the home, and out-buildings) are located so they are not in the flood plain.

The loan processor and I agree that since we don't have a topo map and since the cert came back saying it was in a flood zone, that insurance is required on this loan. Any thoughts? I couldn't find any old posts by searching. Thank you!

Why not send the survey to your determination company and have them do a re-cert which should show the property not in a flood zone.

http://www.fema.gov/library/viewRecord.do?id=2954

Pull up the Adobe version and read the books pages 10-13 (22-24).

My thought is if the structures are that close that there could be any chance of flood then I would urge my lender to get insurance. If the customer does not want to do it then I would have them go through the steps of challenging the flood determination through FEMA.

Good luck!

I'm with ldsnanny on this one. Send the survey to the FDC. Unless any portion of the building(s) touch that zone, you are not required to require FI.

The general practice is, as stated, to provide the survey to the flood determination company and have them re-certify.

The certification vendor you use has a bond/insurance. Regardless, the bank is responsible at the end of the day. As was noted, give all the information to your vendor, who probably wants it anyway, and trust in them. They'll lay it out for you.

I would encourage, but wouldn't require flood coverage if the building is not in a SFHA.

Ok, here's an update:

We sent the survey to our third party flood cert vendor and they came back with the following statement:

I have reviewed this determination for you and have verified that the cabin does come into contact with the flood zone, so I am unable to change the overall zone, but I have updated the comments to read “*CABIN ZONE A: ALL OTHER STRUCTURES ZONE X”. The updated copy is available at any time.

The cabin in question is not usable and was an old nightly rental cabin. The loan officer said that the cabin has no value and the customer is going to tear it down after the loan closes. The home is not in the flood plain. Ugg, I hate flood insurance. Any thoughts?

So now you're down to just dealing with the cabin. Are you sure the cabin really has no value? If it's less than $1,000, which is the lowest deductible, then insurance isn't required. If it's more than that then you will need insurance until it's tore down. Or maybe the seller can be talked into tearing it down prior to closing?

By the way, I doubt the value is less than $1,000. The cost of obtaining a policy on a low-value building is not that much. When the cabin is tore down they can cancel the policy and get a refund. Better to deal with it than have a violation.

If you are making a loan secured by a building that will fall down if you lean against it and flood insurance is required you have the following options.

1. Don't make the loan if the borrower will not obtain insurance.

2. Make the loan with the proper insurance coverage.

3. Lean against the building before you make the loan.

LOL!

Dan - we are in the midst of writing materials for flood training in the branches. May I use that quote?

Sure. I picked it up at a seminar I attended several years ago.

Thanks!

That is great!! I might have to reuse that one as well in the mandatory flood training class I'm having for my loan officers/ops staff.

Yeah, I've heard that one a few times...it's great! I always get the funniest mental picture when I think about it.