I have a loan request that will be secured by an Assignment of Lease. The lease is on a property that is located in a flood zone (it's a boat marina). The lease agreement is between our customer and The Secretary of The Army a/k/a the Corp of Engineers. Would we be required to obtain flood insurance? I'm thinking that from a compliance perspective, it is exempt since we are not actually taking the real estate as our collateral. Should safety and soundness be a consideration here?

You are taking an assignment of a lease but you are not taking a security interest on any structures on the property? So you have no interest in the leasehold improvements?

That is correct, we are only taking an assignment of the lease and the rents. We will not be filing a mortgage or security agreement on the property itself.

If you don't have a security interest in any buildings, then what would there be to insure?

Thank you, Randy. I was on the right track. My concern is that if it did flood and destroyed the whole property, that assignment would be worthless. But that sounds like something management and the officer are going to need to address.