During a remapping a customer's property is now in an area that requires flood insurance. This is a small farm. The house is not in the flood hazard area but 5 buildings are. We had the buildings appraised and the values are $100, $200, $250, $500 and $2000. These are small structures--chicken coops, sheds, etc. The customer refuses to destroy the buildings and also refuses to purchase insurance so we are looking at force placing. The force placed insurance has a $1000 deductible for each policy which would leave only 1 actually covered by insurance. I cannot find anywhere that says we don't have to force place, but are we looking at a UDAAP violation if we do? Am I missing something in the flood regs? Does anyone have a suggestion for this?

If you haven't already, you might double-check the appraisal, or go back to the appraiser, to determine whether the structures are affixed to the site. If not affixed and they are merely sitting on the ground, I don't believe they are insurable "buildings".

Refer to the Homeowner Flood Insurance Affordability Act of 2014.

“Notwithstanding any other provision of this section, flood insurance shall not be required, in the case of any residential property, for any structure that is a part of such property but is detached from the primary residential structure of such property and does not serve as a residence.”

Note the file and move on.

Randy - I was trying to figure out how this new provision would affect structures on a farm. I couldn't find a definition of "residential property" anywhere in the flood laws or manuals and wasn't sure how it would be applied in the case of buildings related to farm operations. If their is a primary residential structure on the property would it automatically exempt any detached structures from the requirement or would it depend on the size/scope of the farming operation? Any thoughts?

From your description, it isn't much of a farm operation if their most valuable out building is only worth $2,000. Since the other buildings are not even insurable, I would just call it a day.

Thanks Randy. I thought we had to work for the regulators rules before we could take advantage of the 2014 Flood changes. If we can do that it will sure make it easier.

It is the law, it was effective immediately, it changed the NFIP. If the prudential regulators want to issue some further guidance that would be great, but in the mean time, the law is the law.

Thanks!

Thanks for weighing in on this Randy, I asked a similar question in March and have been waiting on our regulators too:

http://www.bankersonline.com/forum/ubbthreads.php?ubb=showflat&Number=1908388#Post1908388

I got an email from an FDIC examiner today that they just received the official word on HFIAA and that there will be no implementing regulations. The act clearly defined the changes and they would not cite violations for failure to insure structures that are detached from the primary residence and do not serve as a residence.

Thanks for sharing. We are on the fence whether to quit requiring ins on sheds and other low value buildings.

I got a similar response as CBG, however my FDIC contact emphasized the safety and soundness aspect of waiving the flood insurance.

They stated it may not be an issue from the compliance side but if the building or buildings lend value to the collateral and the LTV and the collateral is unprotected you may have issues with the S&S examiners, so one may want to have a brief discussion with them.

I agree, but even they should not get too bent out of shape over a shed worth $1,500.

I agree, but even they should not get too bent out of shape over a shed worth $1,500.

Agreed, but a $15,000 storage building and workshop they may have an isssue with if not insured and I can assure you every loan officer is going to do their best not to require flood insurance if not mandated by law regardless of the building's value.

We are weighing our options now on how we will proceed.