Thread Options
|
#1806852 - 04/22/13 02:54 PM
Flood Insurance on a Commercial Condo
|
Member
Joined: Jan 2011
Posts: 88
|
We have a loan secured by a commercial condominium. The loan amount is for $372,000. The condo association has $226,400 per unit in coverage leaving a shortage of coverage of $145,600. The condo association has agreed to increase the coverage however the agent is stating that there is a 30 day waiting period due to the new changes from Biggert Waters. I was under the impression that if the increase is due to a loan transaction that the waiting period does not apply. I can't find anything stating that this is no longer the case in the new regulation changes. The lender wants to close this loan this week. Has anyone seen this change or have had a similar experience?
|
Return to Top
|
|
|
|
#1806873 - 04/22/13 03:32 PM
Re: Flood Insurance on a Commercial Condo
jef68
|
10K Club
Joined: Jul 2001
Posts: 84,321
Galveston, TX
|
Just a question - commercial condos are not eligible for per unit coverage. Did that change also?? I thought they are only eligible for non-residential coverage of $500,000 per building.
_________________________
The opinions expressed here should not be construed to be those of my employer: PPDocs.com
|
Return to Top
|
|
|
|
#1806914 - 04/22/13 04:38 PM
Re: Flood Insurance on a Commercial Condo
rlcarey
|
Member
Joined: Jan 2011
Posts: 88
|
Sorry about that. I put that in wrong. The coverage in place is for the building, not the unit. I think that the waiting period might be because the condo association is not the borrower. In which case the 30 day waiting would apply. Do you agree?
|
Return to Top
|
|
|
|
#1806919 - 04/22/13 04:42 PM
Re: Flood Insurance on a Commercial Condo
jef68
|
10K Club
Joined: Jul 2001
Posts: 84,321
Galveston, TX
|
Yes, that most likely is the case.
_________________________
The opinions expressed here should not be construed to be those of my employer: PPDocs.com
|
Return to Top
|
|
|
|
#1806947 - 04/22/13 05:26 PM
Re: Flood Insurance on a Commercial Condo
jef68
|
Member
Joined: Nov 2012
Posts: 73
Out there
|
The 30 day waiting no longer applies to lender-required flood insurance policies. There are exception - mainly for the initial purchase of flood insurance. This is in a FEMA WYO Memo from 3/29 and was also brough up in the ABA's Biggert-Waters Working Group. Link to the memo: http://bsa.nfipstat.fema.gov/wyobull/2013/w-13017.pdf
|
Return to Top
|
|
|
|
#1806974 - 04/22/13 06:13 PM
Re: Flood Insurance on a Commercial Condo
Compli
|
Member
Joined: Jan 2011
Posts: 88
|
Thanks for the link. Just to clarify, if we have a brand new loan, and the property is in a flood zone, and the customer already maintains flood insurance but the loan amount is greater than the insurance maintained, if we require that the customer increase the amount to sufficiently cover the loan they now have a 30 waiting period?
|
Return to Top
|
|
|
|
#1806984 - 04/22/13 06:19 PM
Re: Flood Insurance on a Commercial Condo
jef68
|
10K Club
Joined: Jul 2001
Posts: 84,321
Galveston, TX
|
IF that is the case, then it is going to delay closing for 30-days.
_________________________
The opinions expressed here should not be construed to be those of my employer: PPDocs.com
|
Return to Top
|
|
|
|
#1807161 - 04/23/13 12:42 PM
Re: Flood Insurance on a Commercial Condo
jef68
|
10K Club
Joined: Nov 2002
Posts: 20,656
The Swamp
|
If you'll notice, the memo above states this is not effective until October, 2013.
_________________________
My opinion only. Not legal advice. Say you'll haunt me - Stone Sour
|
Return to Top
|
|
|
|
#1807162 - 04/23/13 12:50 PM
Re: Flood Insurance on a Commercial Condo
jef68
|
10K Club
Joined: Nov 2002
Posts: 20,656
The Swamp
|
More about the memo. It doesn't make much sense. They way it's worded, the only time the wait would apply on a lender request appears to be if there is NO coverage and we find that we NEED coverage, but unrelated to a map change or post 13 months after a revision.
In other words...it looks like the 30-day wait will apply when we goof.
Last edited by RR Joker; 04/23/13 01:01 PM. Reason: nothing
_________________________
My opinion only. Not legal advice. Say you'll haunt me - Stone Sour
|
Return to Top
|
|
|
|
#1807166 - 04/23/13 01:18 PM
Re: Flood Insurance on a Commercial Condo
jef68
|
10K Club
Joined: Jul 2001
Posts: 84,321
Galveston, TX
|
It also does not specifically address an increase in coverage. I guess it depends on how they define "initial purchase". If you have a borrower that needs to increase their insurance in order to make a loan, then if there is a 30 day wait period, it is going to delay a lot of closings.
_________________________
The opinions expressed here should not be construed to be those of my employer: PPDocs.com
|
Return to Top
|
|
|
|
#1807167 - 04/23/13 01:23 PM
Re: Flood Insurance on a Commercial Condo
jef68
|
10K Club
Joined: Nov 2002
Posts: 20,656
The Swamp
|
Yes...they have a great big ole hole in this memo!
_________________________
My opinion only. Not legal advice. Say you'll haunt me - Stone Sour
|
Return to Top
|
|
|
|
#1807328 - 04/23/13 05:50 PM
Re: Flood Insurance on a Commercial Condo
jef68
|
Member
Joined: Nov 2012
Posts: 73
Out there
|
I do hope that they provide additional clarification for the 30 day waiting period. If a borrower lets their policy lapse,they don't pay until after the 30 day payment grace period, then the 30 day waiting period would apply based on this memo. They do have until October to clarify this.
|
Return to Top
|
|
|
|
#1807336 - 04/23/13 06:12 PM
Re: Flood Insurance on a Commercial Condo
Compli
|
Member
Joined: Jan 2011
Posts: 88
|
I agree also on more clarification of the 30 day waiting period. This is going to cause alot of aggrivation on 2nd mortgages and anyone with existing flood policies when increases are necessary. I also have the insurance companies telling me they can't honor the exception due to the new rules even though they are not effective until 10/1.
|
Return to Top
|
|
|
|
#1807344 - 04/23/13 06:20 PM
Re: Flood Insurance on a Commercial Condo
jef68
|
Member
Joined: Nov 2012
Posts: 73
Out there
|
How can they not honor when the new requirements are not effective until 10/1? Did they get the FEMA Memo dated 3/29?
|
Return to Top
|
|
|
|
#1807358 - 04/23/13 06:46 PM
Re: Flood Insurance on a Commercial Condo
jef68
|
10K Club
Joined: Jul 2001
Posts: 84,321
Galveston, TX
|
It is not up to the insurance agents to honor anything - all they have to do is check a box on the application!??!? It is not their insurance.
_________________________
The opinions expressed here should not be construed to be those of my employer: PPDocs.com
|
Return to Top
|
|
|
|
#1983331 - 12/16/14 04:03 PM
Re: Flood Insurance on a Commercial Condo
jef68
|
Member
Joined: Sep 2010
Posts: 61
KY
|
I have a similar situation with commercial condo coverage. How much coverage is required in the following situation:
Loan A for building (s)- $100,000 Loan B for suite - $75,000 Loan C for suite - $200,000
How do you determine the amount of coverage the building owners must have?
_________________________
"Stay committed to your decisions, but stay flexible in your approach."
|
Return to Top
|
|
|
|
#1983335 - 12/16/14 04:07 PM
Re: Flood Insurance on a Commercial Condo
jef68
|
10K Club
Joined: Jul 2001
Posts: 84,321
Galveston, TX
|
You don't give us enough information. You need the lesser of three things: loan amount, available insurance, insurable value.
_________________________
The opinions expressed here should not be construed to be those of my employer: PPDocs.com
|
Return to Top
|
|
|
|
#1983359 - 12/16/14 04:41 PM
Re: Flood Insurance on a Commercial Condo
jef68
|
Member
Joined: Sep 2010
Posts: 61
KY
|
Let me try to get my thoughts together here. We have one loan to the building owners, and then two separate loans to persons buying a suite. Do you determine the amount of coverage for the entire building by the total of all 3 loan amounts, OR, do you only require building insurance for the amount of the lesser of the loan amt made to building owners, insurable value, or NFIP available and the suite owners would require contents coverage to make up any difference? Their loans will be larger than what the building owners now owe.
Last edited by Linslo, CRCM; 12/16/14 05:06 PM.
_________________________
"Stay committed to your decisions, but stay flexible in your approach."
|
Return to Top
|
|
|
|
#1983435 - 12/16/14 07:25 PM
Re: Flood Insurance on a Commercial Condo
jef68
|
10K Club
Joined: Jul 2001
Posts: 84,321
Galveston, TX
|
Building owners? If they have formed a condo association, how can they be building owners. They may own the remaining units, but the condo association would now own the building and the common areas, unless condos in your jurisdiction work differently than in mine.
Regardless, if it is one building, the building is limited to $500,000 in insurance. If the insurable value is more than $375,000, which is the total of your three loans, that is the number you would need. Content insurance by the unit owners is up to you.
_________________________
The opinions expressed here should not be construed to be those of my employer: PPDocs.com
|
Return to Top
|
|
|
|
#1983456 - 12/16/14 07:58 PM
Re: Flood Insurance on a Commercial Condo
jef68
|
Member
Joined: Sep 2010
Posts: 61
KY
|
Thanks !
_________________________
"Stay committed to your decisions, but stay flexible in your approach."
|
Return to Top
|
|
|
|
|
|