Commercial Loan Officer would like to originate a revolving line of credit where the collateral is secured by the pro-rata portion of 8 one-to-four family residences. One of those residences is in a flood zone.

To calculate the correct flood amount, the Commercial Loan Officer wants the Bank use the "equity amount" of the residence instead of using the original loan amount in additional to the new loan amount for the revolving line of credit to arrive at the correct amount of flood insurance.

Note the Bank has pre-existing liens on all 8 residences.

My question is to calculate the outstanding principal balance, may the Bank use the "equity amount" or must the Bank use the original loan amount?

Thank you in advance.

First you have to define "equity amount" as that term is not a defined term anywhere.

Second, the answer is regardless of the definition to the above it is the lesser of the total loan amount of all loans secured by the property in the SFHA, the RVC or the maximum insurance available.

You don't get to portion anything out.

I'm adding on to this cause I have a similar situation (I think): Commercial loan with a balance of $480,000 is secured by 8 units 3 of which are in a flood zone. In the appraisal it states that the RCV new of the 3 units is $405,276 and RCV minus depreciation is $342,924. Which amount would be more appropriate to cover?

Actual cost value (ACV) on other than a primary residence.