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#2043592 - 10/09/15 04:02 PM Contents Coverage required?
iliniyak Offline
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Joined: Jan 2008
Posts: 285
We currently have a business loan on real estate in flood zone. If the customer is getting a separate loan on some new business equipment, do we need to obtain contents coverage? The loans will not be cross-collateralized.

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Flood Compliance
#2043628 - 10/09/15 06:20 PM Re: Contents Coverage required? iliniyak
Dan Persfull Offline
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Dan Persfull
Joined: Aug 2002
Posts: 47,517
Bloomington, IN
Content coverage is only required when the loan will be secured by both the building and contents located in the SFHA.
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The opinions expressed are mine and they are not to be taken as legal advice.

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#2043677 - 10/09/15 07:46 PM Re: Contents Coverage required? iliniyak
iliniyak Offline
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Joined: Jan 2008
Posts: 285
Thank you Dan

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#2048259 - 11/05/15 05:19 PM Re: Contents Coverage required? iliniyak
She Golfs Offline
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Joined: Mar 2004
Posts: 31
massachusetts
Is this answer different if the loans ARE cross collateralized?

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#2048268 - 11/05/15 05:44 PM Re: Contents Coverage required? iliniyak
David Dickinson Offline
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David Dickinson
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Posts: 18,762
Central City, NE
No. Apply the same logic Dan gave. If you cross collateralize, you may very well have a loan secured by a building in a SFHA AND the contents in that building. If so, content coverage is required.
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http://www.bankerscompliance.com

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#2048279 - 11/05/15 06:04 PM Re: Contents Coverage required? iliniyak
She Golfs Offline
Junior Member
Joined: Mar 2004
Posts: 31
massachusetts
Is there an interpretation document that I can point to that will support this position? I agree that cross collateralization may change the flood insurance requirements on a collateral loan that was previously not tied to the R.E. loan, but can't find any citation to support that.

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#2048292 - 11/05/15 06:44 PM Re: Contents Coverage required? iliniyak
happyauditor Offline
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happyauditor
Joined: Nov 2004
Posts: 812
NY
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#2048339 - 11/05/15 08:40 PM Re: Contents Coverage required? iliniyak
David Dickinson Offline
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David Dickinson
Joined: Nov 2000
Posts: 18,762
Central City, NE
You don't need an interpretation. You can simply read §339.3(a) where it says if you have a loan that is secured by a building in a SFHA and by the contents in that building, you must have insurance on the contents. Happy also gives you a FAQ that clarifies it even more. Your loan is secured by both the building and the contents. What does it matter if it is a cross-colalterlized loan or collateral taken directly from the new loan?
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David Dickinson
http://www.bankerscompliance.com

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