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#2134229 - 06/14/17 01:30 PM Tricky Commercial Flood Question
Ishmael Offline
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Joined: Feb 2016
Posts: 23
Without being more than generally conversant in flood issues, I've scoured the threads and have a coverage amount question on three commercial condos. The facts:
*bank holds loans on 3 units in 16 unit commercial building. Loans are each roughly only $25K.
*RCV $1.5MM
*After some shenanigans, there's General building coverage of $295K. Why that number, I don't know.
Question: is there a coverage shortfall? (I think so, and that $500K coverage is needed, but I frankly can't cleanly articulate why). If so, how can it be addressed? I think that only the Association can purchase NFIP building coverage, and individual owners can only purchase contents coverage. I think that unit owners can pressure the Association to purchase adequate coverage, but otherwise have no leverage. Am I way off base? Seeking a sensible solution for these borrowers. Any thoughts appreciated!

(Never have quite understood the Anonymous feature, but that's OK).
Last edited by Ishmael; 06/14/17 01:34 PM.
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#2134313 - 06/14/17 03:59 PM Re: Tricky Commercial Flood Question Ishmael
David Dickinson Offline
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David Dickinson
Joined: Nov 2000
Posts: 18,762
Central City, NE
I can't answer your question without knowing more details. You say there are "loans" on 3 units roughly only $25k. Is that 3 loans? Thus 3 x $25k. If so, your total loan anoint is $75k and that would be the "lesser of 3".

You need (as a minimum) the lesser of:
1. Loan(s) balance. Use the combined loan amount;
2. Insurable value. You won't get a payback on a loss of RCV because this isn't a single unit. It's 16 units.
3. Max available - $250k for each dwelling unit.

You might benefit by reading the article at our website entitled "Flood Insurance Insurable Value". You can find it in the "Free Downloads" section at our website: https://www.bankerscompliance.com/resources/ That will also explain why you shouldn't get RCV
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David Dickinson
http://www.bankerscompliance.com

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#2134315 - 06/14/17 04:06 PM Re: Tricky Commercial Flood Question David Dickinson
rlcarey Online
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rlcarey
Joined: Jul 2001
Posts: 77,573
Galveston, TX
Originally Posted By David Dickinson
You need (as a minimum) the lesser of:
1. Loan(s) balance. Use the combined loan amount;
2. Insurable value. You won't get a payback on a loss of RCV because this isn't a single unit. It's 16 units.
3. Max available - $250k for each dwelling unit.


Just a note. Since this is a non-residential condo building, The maximum insurance available on the whole complex is $500,000. Per unit coverage is not available.
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The opinions expressed here should not be construed to be those of my employer: PPDocs.com

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#2134405 - 06/14/17 09:08 PM Re: Tricky Commercial Flood Question David Dickinson
Ishmael Offline
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Joined: Feb 2016
Posts: 23
Thanks David, Randy. I've been here longer than my profile says, and am always grateful for your insights. The BCC website and the free downloads stuff is excellent, especially the RE lending matrix. Wish I had the power to be a paying customer. Sort of!

Yes, three loans, three notes and mortgages. Each $25-30K. And commercial condos. Former factory space converted to workspace. Based on your write-up (which was great), ACV, not RCV, is the actual operative figure, if it can be calculated.

I'm still stuck on whether we even have a shortfall. My feeling is that we do, and that it's the gap between $500K and $295K, which is how much insurance is presently on the building. If I'm right--big if--I'm trying to figure out the best, least ridiculous remedy.

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