Was this section implemented? It all appears as if it still in proposed and I can not locate the updated booklet with 13b disclosure...

SEC. 13. EXCLUSION OF DETACHED STRUCTURES FROM MANDATORY PURCHASE EQUIREMENT.

(a) Exclusion.--Subsection (c) of section 102 of the Flood Disaster Protection Act of 1973 (42 U.S.C. 4012a(c)) is amended by adding at the end the following new paragraph: ``(3) Detached structures.--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.''.

(b) RESPA Statement.--Section 5(b) of the Real Estate Settlement Procedures Act of 1974 (12 U.S.C. 2604(b)) is amended-- (1) in paragraph (14), by inserting before the period at the end the following: ``, and the following statement: `Although you may not be required to maintain flood insurance on all
structures, you may still wish to do so, and your mortgage lender may still require you to do so to protect the collateral securing the mortgage. If you choose to not maintain flood insurance on a structure, and it floods, you are responsible for all flood losses relating to that structure.' ''; and (2) by transferring and inserting paragraph (14), as so amended, after paragraph (13).

The law is effective when it was released (2014). The RESPA statement is now in the new Tool Kit booklet.

There is a proposal (Oct 2014) asking if the regulators should defined what is "residential property". So we're still waiting to get some things nailed down.

Great, thank you

When was the RESPA Toolkit revised to include the langauge from Sec 13 of HFIAA? It is on page 24 of the toolkit.

http://files.consumerfinance.gov/f/201503_cfpb_your-home-loan-toolkit-web.pdf

A month or so ago for used only on and after 08/01/15.

Does the delay for TRID impact the 8/1 date for the Toolkit?

Yes - it was part of the same regulatory final rule.

We are in the process of reviewing our project plan for the Final Flood Insurance rules. We are all set with the Special Information Booklet, however a question was asked about the What You Should Know About Home Equity Lines of Credit and if the same/similar language should be included.

I did not find any mention of updating this brochure. The borrower would receive the notice to borrower if property is in a SFHA so they would be aware of the escrow requirement and that flood insurance may not be required for detached structures.

Any different opinions?

Thanks!

The legal requirement is that the wording be included by the Bureau in the Toolkit. There is no requirement that the disclosure be added to anything else.

That said, the statements in that disclosure could be shared with any borrower with property in a flood zone using some vehicle other than the toolkit. But so far, that's optional.

The wording is also included in the new Flood Hazard Notice, but that's optional until 1/1/16. My opinion is to give the wording to all applicable borrowers until you start using the new Notice. It's not a requirement, but I'd error on the side of being conservative with this issue.

John and David - thank you both for your insight!

It seems like the answer to my question on this topic should be straightforward, but I don't want to assume anything.

Residential property - ONLY the detached garage is in the flood zone - house is not. Does the exclusion cited in the first message of this thread cover this situation? (i.e., flood insurance would not be required on the garage) Or does the fact that the house itself is not in the flood zone negate the exclusion for the garage?

If the residence is not located in the SFHA then flood insurance would not be required for any garage, shed, barn located on the property that may be in the SFHA. Just make sure that the garage does not include any living quarters that may cause it to require coverage.

It would be a safety and soundness decision on whether to require flood coverage.

I agree with Jade's answer. Let me say it another way:

Whether the residence is located in a SFHA is not a factor for the “detached structure” exemption.

Thank you both. That was my assumption, but you know what happens when you assume...

I would like to run a scenario past you all related to detached structures, just to make sure I'm understanding. I'm actually using my own property as an example, but we are not in flood zone. If we were, which detached structures would require coverage:

Building 1: Single family residence - Flood insurance would be required
Building 2: Large Shop/Garage with Mother in Law apartment - Flood insurance required due to part of building used as a residence
Building 3: Well House - This building is detached from the house but would it still require insurance? If it was destroyed, there would be no water to the property
Building 4 & 5: Goat Barn and Chicken House - Are these considered agricultural purpose buildings, so can not fall into the detached structure exemption?

I believe all 5 structures on our property would require flood coverage, but would love some additional input if someone else sees this differently.

Thanks!

I would say only building 1 and 2 would require insurance under the new detached structure rules. If the goats and chickens are used for your family only and you are not selling eggs and milk at the farmer's market then I believe they are exempt because they are primarily for personal household purposes.

If the well house floods and is damaged, having flood insurance is not going to make a difference in the speed of recovering water to the property. Getting someone out there to make repairs is what is important. Doubt you would wait for the flood check to come in to fix it.

I agree. Well house could be exempted. The goats and chickens depend on what you do with those goats and chickens...commercial vs personal use.

FWIW: I agree with what Job and KB stated. Loan officers (or a representative) will need to do a site visit (or have a detailed discussion with borrowers) to determine the use of each building. If the building is used for personal reasons (not business), then it can be exempted.

Do condos qualify as residential property? We have loans that previously showed the condo and the detached garage units both in flood zone, then after going through the LOMA process, it was determined the condos are no longer in the flood zone. But....isn't there always a but....the garages are. Just used as garage or storage by individual owners...no living quarters.

Other than as a precaution, would it be necessary to have flood insurance on these garage units?

From page 26 of the Final Rule:

Commenters in particular referenced Q&A 51, which indicates that “residential improved real estate” does not distinguish whether a building is single- or multi-family, or owner- or renter-occupied, and includes single-family dwellings, two- to four-family dwellings, multi-family dwellings containing five or more residential units, and mixed-use buildings, so long as the building is used primarily for residential purposes.40

Therefore, I believe a residential condo is a residential structure that qualifies for the detached structure exemption.

Thank you!

I am wondering how we would treat a vacant structure for this exemption that there is no intention of using. We have a residential property with an old barn and grain silo that are no longer being used. Since the barn is not being used at all, how would we make a determination regarding the its purpose? I assume we would still need to require insurance on the silo, since it would be tough to argue the it could ever have a personal family or household purpose.

This is from the bottom of page 25 and top of page 26 of the Final Rule:
Consistent with Regulation Z, for purposes of the detached structures exemption, the final rule clarifies that the phrase “a structure that is part of a residential property” refers to a structure used primarily for personal, family, or household purposes, and not used primarily for agricultural, commercial, industrial, or other business purposes.

And from §339.4(d)(3):
(3) Any structure that is a part of any residential property but is detached from the primary residential structure of such property and does not serve as a residence. For purposes of this paragraph (d)(3):
(i) “a structure that is a part of a residential property” is a structure used primarily for personal, family, or household purposes, and not used primarily for agricultural, commercial, industrial, or other business purposes;

We need more guidance on this, but I hear you saying "it's not used for business purposes, but it's not really used for personal purposes either."

My personal opinion: I think the objective of the HFIAA was to exempt detached structures on residential properties. Since these are not being used for business purposes, I think they can be exempt, but it would be great to get regulatory clarification.

Not to hijack this thread, but I have a related question:

What if the "residence" on the property is a travel trailer/camper? The owners use the property seasonally as camping land. There is a garage structure and camper on the property - all of which is in a SFHA. The camper stays on the site year-round.

Obviously the camper does not require flood insurance - but what about the garage? Can it be exempted under the detached structures exemption?

TIA!