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#218254 - 07/30/04 04:27 PM Mutliple propeties & flood required
Anonymous
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I am having trouble finding guidelines addressing specifics on coverages required when using multiple properties on a loan and flood coverage. I have one property that is in the zone, and one that isn't. I have looked at the Mandatory Purchase of Flood Ins. book, and have searched as well here but unless I am missing it, can't see to locate anything on the subject. If someone could point me in the right direction I would appreciate. Thanks

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General Discussion
#218255 - 07/30/04 04:52 PM Re: Multiple properties & flood required
Dan Persfull Online
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Dan Persfull
Joined: Aug 2002
Posts: 47,016
Bloomington, IN
Your coverage requirements are the same.

You must have coverage for the least of:

The maximum coverage available under the NFIP for the structure type - residential or non-residential;

The unpaid principal balance of the loan;

The value of the property less the land value. (In the case of multiple structures each has to be insured either to its value, or if the values exceed the outstanding principal balance they have to be insured (allocating coverage to each structure) to cover the loan's outstanding principal balance.
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#218256 - 07/30/04 04:52 PM Re: Mutliple propeties & flood required
Nameless Offline
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Chaos
Look at page 23 of the Mandatory Purchase Guidelines under the section on "Calculating Coverage"

"The lending regulations provide that, in addition to the statutorily prescribed dollar limits, flood insurance coverage under the NFIP is limited to the overall value of the building. Accordingly, a lender must evaluate the amount of coverage required in relation to the portion of the loan that is associated with the improved real estate (excluding the appraised value of the land), or the maximum amount of insurance available under the NFIP, whichever is less."

You can also find the regulatory reference at 12 CFR 208.25(c)(1)
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#218257 - 07/30/04 04:52 PM Re: Mutliple propeties & flood required
David Dickinson Offline
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David Dickinson
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Central City, NE
If you give us some details, we can probably answer your question. What is the value of the building in the flood zone? What is the loan amount?
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#218258 - 07/30/04 05:13 PM Re: Mutliple propeties & flood required
Anonymous
Unregistered

Thanks to all for the reply. David here is the case senerio, its goofy to start with so maybe that is why I am having trouble getting my hands around it.

These two propertied were purchased by a local housing authority. They received a state grant for 75% of the purchase price and had us finance the rest.

Property 1 Appraised value 57,000 site value 10,000
not in flood zone

Property 2 Appraised at 49,500 site value 10,000
in flood zone

our loan a whopping $15,000

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#218259 - 07/30/04 05:43 PM Re: Multiple properties & flood required
Dan Persfull Online
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Dan Persfull
Joined: Aug 2002
Posts: 47,016
Bloomington, IN
Property 2 ; 49,500 - 10,000 = 39,500 structure value.

Outstanding loan balance = 15,000

Coverage required 15,000.

Property 1 - not in SFHA therefore no flood insurance requirements.
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The opinions expressed are mine and they are not to be taken as legal advice.

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#218260 - 07/30/04 06:45 PM Re: Multiple properties & flood required
David Dickinson Offline
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David Dickinson
Joined: Nov 2000
Posts: 18,762
Central City, NE
I agree with Dan. Property 1 is not considered when calculating flood insurance.
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#218261 - 09/13/05 09:39 PM Re: Multiple properties & flood required
HRH Okie Banker Offline
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Joined: Jan 2003
Posts: 3,070
Oklahoma
Need help. I have researched! I just seem to not be able to absorb anymore today.

You have a loan for $38,900.

Property A is not in a flood zone valued for $40,000

Property B IS in a flood zone value at $8,000.

How much flood insurance is required on this loan? Any help is appreciated.
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#218262 - 09/13/05 09:56 PM Re: Multiple properties & flood required
Cowboys Fan Offline
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Joined: Dec 2002
Posts: 4,600
SC
I'll go with 8,000 - lesser of the principal balance of the loan vs the appraised value of the improvements
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#218263 - 09/13/05 10:06 PM Re: Multiple properties & flood required
Skittles Online
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Skittles
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Posts: 13,964
TN
Cowboy Fan I believe you are correct.
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#218264 - 09/13/05 10:47 PM Re: Multiple properties & flood required
HRH Okie Banker Offline
Power Poster
Joined: Jan 2003
Posts: 3,070
Oklahoma
That is what I thought, but I don't believe myself today. Thanks alot, your quick help is wonderful.
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#647591 - 12/05/06 10:59 PM Re: Multiple properties & flood required Skittles
run4fun Offline
Member
Joined: Mar 2002
Posts: 98
Are the Flood experts still out there?

Loan amount is $270,000.

Property 1 is not in flood area and has a value of $114,000. Property 2 is in a flood zone and the improvement value is $120,000.
Additional collateral is inventory stored in property 2 valued at $100,000.

What do I need for flood insurance? I'm stumped!

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#647601 - 12/05/06 11:22 PM Re: Multiple properties & flood required run4fun
David Dickinson Offline
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David Dickinson
Joined: Nov 2000
Posts: 18,762
Central City, NE
Disregard property 1 since it is not in a flood zone. It will not factor into the "how much" calculation.

Banks must insure that borrowers purchase flood insurance coverage at least equal to the following minimums:
1. Outstanding principal balance of all loans secured by the property;

2. The appraised value of the property minus the land value (the improved property value); and

3. The maximum insurance available under the principal flood insurance program (generally $250,000 for dwellings and $500,000 for non-dwellings) and $100,000/500,000 in contents, respectively.

You don't say if these properties are dwellings are not, but it won't be a factor here (unless the community is in the emergency program). Here's your factors:
LA = $270,000
AV = $120,000 + $100,000 in contents
Maximum = $250,000 / $500,000

Therefore, you need $120,000 in flood insurance on the structure and $100,000 on the contents.
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#647616 - 12/05/06 11:52 PM Re: Multiple properties & flood required David Dickinson
run4fun Offline
Member
Joined: Mar 2002
Posts: 98
Thank you for your help. I think I've been making this more difficult than necessary. (And I'll probably do it again.)


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