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#1808449 - 04/26/13 03:10 PM Replacement Cost on Flood Policy
lds1958 Offline
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I know to determine how much flood insurance is needed we have to take the lesser of either loan amount, Replacement Cost Value/Actual Cost Value or the Max NFIP requirement. I'm looking at a flood policy that has a replacement cost value on it however the flood insurance policy is less. Should we consider the RCV on the Flood Insurance Policy when determining how much flood insurance is needed?? Just concerned because this came up the other day also.

Thanks

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#1808524 - 04/26/13 05:08 PM Re: Replacement Cost on Flood Policy lds1958
RR Joker Offline
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I would say yes...since they supplied it.
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#1808680 - 04/26/13 07:37 PM Re: Replacement Cost on Flood Policy lds1958
KPOC Offline
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Greater Boston Area
Your bank needs to decide how you determine RCV/ACV (e.g., flood insurance declarations page, hazard insurance declarations page, cost-approach appraisal, etc.). You should pick one method and be consistent. Remember, you don't need to insure to RCV/ACV if the loan amount is less than that or $250,000/$500,000 is less than that. However, flood insurance is always limited on the upside by RCV/ACV.

So, if it is your bank's policy to use RCV on the flood insurance policy to determine appropriate coverage, then yes, that is okay.

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#1808705 - 04/26/13 07:52 PM Re: Replacement Cost on Flood Policy lds1958
RR Joker Offline
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Sorry...but I don't agree.

At times you are lucky to find one of those items..but any of those items can be sufficient.
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#1808734 - 04/26/13 08:06 PM Re: Replacement Cost on Flood Policy lds1958
KPOC Offline
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Greater Boston Area
RR, you should at least have a hierarchy. If you have two competing RCVs from two sources, your staff need to know which one to use. What if they use the higher amount for some borrowers and the lower amount for others with no justification as to why?

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#1808857 - 04/29/13 01:09 PM Re: Replacement Cost on Flood Policy lds1958
RR Joker Offline
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Let me qualify my post above. What I didn't agree on is the availability of all of those methodologies. lds's bank and mine are similarly situated and I pretty well know what she's up against on documentation availability.

We take whatever we can find to go by. wink

lds...I did mean to ask, however...the particular property that RCV was listed on WAS owner-occupied 1-4 wasn't it? If not, I could see why it would have been less (ACV instead).

I didn't question it, because it was obvious you were taking RCV/ACV, which ever applies, into consideration.
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#1809548 - 04/30/13 07:39 PM Re: Replacement Cost on Flood Policy KPOC
mmumm Offline
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Santa Cruz, California
Originally Posted By: KPOC
However, flood insurance is always limited on the upside by RCV/ACV.


Can someone point me to a resource that states that that we cannot require flood coverage above the RCV/ACV?

Thanks!

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#1809552 - 04/30/13 07:46 PM Re: Replacement Cost on Flood Policy lds1958
Dani York, CRCM Offline
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TN
I don't know of anything that explicitly states "no insurance over RCV/ACV", but how can you insure something for more than it is worth? It is most assuredly a UDAAP to require a consumer to pay for coverage they can never make a claim on (the amount over the RCV/ACV).
Last edited by Dani York, CRCM; 04/30/13 07:47 PM.
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#1809554 - 04/30/13 07:48 PM Re: Replacement Cost on Flood Policy lds1958
RR Joker Offline
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Why would you require something a customer would never ever receive?
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#1809558 - 04/30/13 07:52 PM Re: Replacement Cost on Flood Policy lds1958
RR Joker Offline
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From the now rescinded guidelines;

The insurable value of the building and its
improvement(s) will govern the amount that
can be required. The amount of required
flood insurance coverage is the least of the
principal balance of the loan(s), the
insurable value of the building, or the
maximum coverage available under the
NFIP. The NFIP policy does not provide
coverage for losses in excess of the value of
the insurable building.
By requiring
adequate coverage, the lender also is
protecting the Federal Government’s
interests by preserving the assets of agencies
that insure the lender’s deposits.
_________________________
My opinion only. Not legal advice.

Say you'll haunt me - Stone Sour

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#1809635 - 04/30/13 10:25 PM Re: Replacement Cost on Flood Policy lds1958
rlcarey Offline
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Galveston, TX
Or from the Q&A that has not been rescinded:

16. Can a lender require more flood insurance than the minimum required by the Regulation?

Answer: Yes. Lenders are permitted to require more flood insurance coverage than required by the Regulation. The borrower or lender may have to seek such coverage outside the NFIP. Each lender has the responsibility to tailor its own flood insurance policies and procedures to suit its business needs and protect its ongoing interest in the collateral. However, lenders should avoid creating situations where a building is “over-insured.”
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#1809686 - 05/01/13 01:30 PM Re: Replacement Cost on Flood Policy lds1958
RR Joker Offline
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RR Joker
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The Swamp
^^^is what I was actually looking for.

Thanks!
_________________________
My opinion only. Not legal advice.

Say you'll haunt me - Stone Sour

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#2137157 - 07/06/17 07:43 PM Re: Replacement Cost on Flood Policy RR Joker
fnblikdd Offline
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Joined: Apr 2013
Posts: 15
NY
I would like to tag onto this old discussion as it relates to condos:

From what I am reading, "The maximum amount of Flood insurance that can be purchased on a condo is 80% of the replacement cost of the building or the total number of units in the condo building times $250,000, whichever is less.

What if there is no documented Replacement Cost on the building. What can we use in place of "Replacement Cost Value"?

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#2137175 - 07/06/17 08:49 PM Re: Replacement Cost on Flood Policy lds1958
rlcarey Offline
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Galveston, TX
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