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#1806852 - 04/22/13 02:54 PM Flood Insurance on a Commercial Condo
jef68 Offline
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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?

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#1806873 - 04/22/13 03:32 PM Re: Flood Insurance on a Commercial Condo jef68
rlcarey Online
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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.
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#1806914 - 04/22/13 04:38 PM Re: Flood Insurance on a Commercial Condo rlcarey
jef68 Offline
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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?

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#1806919 - 04/22/13 04:42 PM Re: Flood Insurance on a Commercial Condo jef68
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Yes, that most likely is the case.
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#1806947 - 04/22/13 05:26 PM Re: Flood Insurance on a Commercial Condo jef68
Compli Offline
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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

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#1806974 - 04/22/13 06:13 PM Re: Flood Insurance on a Commercial Condo Compli
jef68 Offline
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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?

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#1806984 - 04/22/13 06:19 PM Re: Flood Insurance on a Commercial Condo jef68
rlcarey Online
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IF that is the case, then it is going to delay closing for 30-days.
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#1807161 - 04/23/13 12:42 PM Re: Flood Insurance on a Commercial Condo jef68
RR Joker Offline
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If you'll notice, the memo above states this is not effective until October, 2013.
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#1807162 - 04/23/13 12:50 PM Re: Flood Insurance on a Commercial Condo jef68
RR Joker Offline
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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
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#1807166 - 04/23/13 01:18 PM Re: Flood Insurance on a Commercial Condo jef68
rlcarey Online
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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.
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#1807167 - 04/23/13 01:23 PM Re: Flood Insurance on a Commercial Condo jef68
RR Joker Offline
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Yes...they have a great big ole hole in this memo!
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#1807168 - 04/23/13 01:24 PM Re: Flood Insurance on a Commercial Condo rlcarey
Kathleen O. Blanchard Offline

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Originally Posted By: rlcarey
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.


I agree. The exception previously was for insurance in connection with a loan. Now it says initial purchase ( plus those other situations). Needs clarification.
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#1807328 - 04/23/13 05:50 PM Re: Flood Insurance on a Commercial Condo jef68
Compli Offline
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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.

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#1807336 - 04/23/13 06:12 PM Re: Flood Insurance on a Commercial Condo Compli
jef68 Offline
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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.

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#1807344 - 04/23/13 06:20 PM Re: Flood Insurance on a Commercial Condo jef68
Compli Offline
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How can they not honor when the new requirements are not effective until 10/1? Did they get the FEMA Memo dated 3/29?

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#1807358 - 04/23/13 06:46 PM Re: Flood Insurance on a Commercial Condo jef68
rlcarey Online
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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.
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#1811968 - 05/07/13 09:36 PM Re: Flood Insurance on a Commercial Condo jef68
Tillie Offline
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We have similar situation. Applicant bought & paid for flood insurance but did not get enough coverage initially. Six days later, she contacted agency to increase the policy to cover the loan amount and paid the additional premium. Insurance company says they are bound by federal law to require the 30-day waiting period now so we cannot close until 30 days from the latter date. So frustrating!!

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#1983331 - 12/16/14 04:03 PM Re: Flood Insurance on a Commercial Condo jef68
L Morris Offline
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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?
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#1983335 - 12/16/14 04:07 PM Re: Flood Insurance on a Commercial Condo jef68
rlcarey Online
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You don't give us enough information. You need the lesser of three things: loan amount, available insurance, insurable value.
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#1983359 - 12/16/14 04:41 PM Re: Flood Insurance on a Commercial Condo jef68
L Morris Offline
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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.
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#1983435 - 12/16/14 07:25 PM Re: Flood Insurance on a Commercial Condo jef68
rlcarey Online
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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.
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#1983456 - 12/16/14 07:58 PM Re: Flood Insurance on a Commercial Condo jef68
L Morris Offline
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KY
Thanks !
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