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#218284 - 07/30/04 05:22 PM
FLOOD: 3 Websites - Conflicting Information
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Anonymous
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I have done some research on Bankers Online, Compliance Headquarters and Kirchman regarding flood insurance and now I am a bit confused. My question is, if a borrower wants a loan to purchase a mobile home and the mobile home is going to rest on a permanent foundation but the real estate is not being used as collateral, is a flood determination required? One source says that the determination is only required if the extension of credit is or will be secured by improved real property. The other two it is needed regardless of whether the loan is secured by real property. Please clarify.
Bankers Online:
Flood Determination & Mobile Homes
by Mary Beth Guard
BIO AND CONTACT INFO
QUESTION: If a loan is secured with a mobile home NOT attached to real estate, is a flood determination needed?
ANSWER: A flood determination is only required is the extension of credit is or will be secured by improved real property or an affixed mobile home. If the mobile home is not affixed, the flood determination requirement does not apply.
Compliance Headquarters Website:
Question: I´m making a loan secured by a mobile home. The note will not include a security interest in the underlying real estate. Do the federal flood insurance laws apply to this transaction?
Answer: Yes. The federal flood insurance laws apply to "home only" transactions. The key question is whether the mobile home is or will be located in a Standard Flood Hazard Area (SFHA). The loan need not include a security interest in the real estate underlying the mobile home in order for the mandatory purchase provisions to apply.
As a practical matter, this requirement may be difficult to meet when the lender may not know where the mobile home will be located until just before the loan closes. Nonetheless, as soon as the mobile home´s permanent location is identified, the lender must determine whether the home is in an SFHA, notify the borrower, and mandate the purchase of any required insurance. (posted 07/02/01)
Kirchman Website:
Mobile homes (referred to in the Act as “manufactured homes”) are insurable, if the following three conditions are met:
1. The mobile home must rest on a permanent foundation, meaning no weight rests on any wheels or axles. This foundation may be as simple as concrete blocks, even if they are noncontinuous. The foundation must be able to resist flotation, collapse, or lateral movement.
2. The mobile home must be anchored to the foundation according to community tie-down regulations.
3. The mobile home must be connected to utilities.
If these three conditions are met, any loan secured by a mobile home, regardless of whether the land it sits upon is owned or rented by the borrower, and regardless of whether the land secures the loan, must be covered by flood insurance. If the mobile home does not meet these standards, insurance is not mandatory.
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#218285 - 07/30/04 05:57 PM
Re: FLOOD: 3 Websites - Conflicting Information
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Gold Star
Joined: Jan 2004
Posts: 318
USA
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All three sites are saying the same thing. If the mobile home is on a permanent foundation, flood insurance rules apply regardless of whether you have a security interest in the underlying real estate. The site that says a flood determination is required only if the loan is secured by improved real property says "improved real property OR an affixed mobile home."
_________________________
CRCM, CAFP, DAD
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#218286 - 07/30/04 05:58 PM
Re: FLOOD: 3 Websites - Conflicting Information
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10K Club
Joined: Aug 2002
Posts: 47,535
Bloomington, IN
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I think all 3 answers are saying the same.
Maybe you missed Mary Beth's comment:
A flood determination is only required if the extension of credit is or will be secured by improved real property or an affixed mobile home.
_________________________
The opinions expressed are mine and they are not to be taken as legal advice.
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#218287 - 07/30/04 06:26 PM
Re: FLOOD: 3 Websites - Conflicting Information
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Anonymous
Unregistered
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Sorry, you are right I did not see the OR . Thanks
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#218289 - 07/30/04 09:06 PM
Re: FLOOD: 3 Websites - Conflicting Information
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Gold Star
Joined: Jan 2004
Posts: 318
USA
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Quote:
The flood insurance rules apply to ALL mobile homes loans, whether tied down to a permanent foundation or not.
David, your statement appears to contradict Mary Beth Guard's answer when she states "If the mobile home is not affixed, the flood determination requirement does not apply."
Care to elaborate?
_________________________
CRCM, CAFP, DAD
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#218290 - 07/30/04 09:51 PM
Re: FLOOD: 3 Websites - Conflicting Information
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10K Club
Joined: Aug 2002
Posts: 47,535
Bloomington, IN
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From page 16 of the Mandatory Purchase of Flood Insurance Guidelines:
Consequently, lenders regulated by, or whose deposits are insured by, Federal entities for lending regulation may make conventional loans secured by mortgages on buildings and mobile homes in SFHAs in nonparticipating communities. They may do so notwithstanding the fact that such property is not eligible for the purchase of National Flood Insurance. Lenders are still required to observe the provisions of the Federal laws and regulations governing the NFIP related to making determinations and providing notice, even though the requirement to purchase flood coverage does not apply.
From page 26:
Upon learning the location of the mobile home, the lender must use its best efforts to determine whether the mobile home is in an SFHA, notify the borrower, and mandate the purchase of any required flood insurance .
_________________________
The opinions expressed are mine and they are not to be taken as legal advice.
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#218291 - 07/30/04 10:55 PM
Re: FLOOD: 3 Websites - Conflicting Information
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10K Club
Joined: Nov 2000
Posts: 18,763
Central City, NE
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Yes. Here is an excerpt from our Advanced Lending Manual: Improved Real Estate:A walled and roofed structure attached to real estate with a value of more than $500.00. Building means a walled and roofed structure, other than a gas or liquid storage tank, that is principally above ground and affixed to a permanent site, and a walled and roofed structure while in the course of construction, alteration or repair [§339.2(c) – page 2663]. Mobile home means a structure, transportable in one or more sections, that is built on a permanent chassis and designed for use with or without a permanent foundation when attached to the required utilities. The term mobile home does not include a recreational vehicle. For purposes of (the Flood Disaster Protection Act), the term mobile home means a mobile home on a permanent foundation [§339.2(g) – page 2663]. A mobile home located in a SFHA must be anchored to a permanent foundation to resist flotation by providing over the top or frame ties to ground anchors [FEMA Flood Insurance Manual]. Borrowers must provide tie downs if necessary to obtain flood insurance if a mobile home is located within a SFHA [Ken Baebel from the FDIC – Washington, D.C.]. ----------------------------------------------------------- Imagine this situation: You make a loan secured by a mobile home that is not tied down. The mobile home is swept down stream by a terrible flood. The borrower sues the bank and you are in the court room. The judge asks you: Why didn't you notify the borrowers that their home was in a flood hazard area? Why didn't you make them buy flood insurance as the law requires? YOU: Your Honor. Their mobile home is not a mobile home. JUDGE: Excuse me. Isn't a MH, a MH? YOU: No. Their MH is not tied down, so it's not a MH. JUDGE: What would you call it then? YOU: A boat, now.  ---------------------------------------------------------- Sorry for the attempt at humor on that last line. Just trying to lighten up the post.  Seriously, can you see this risk? I believe that a bank should follow all of the Flood requirements for all mobile homes. If the borrower can't buy flood insurance because their MH is not tied down, tell them to have it tied down so that they qualify for insurance.
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#218292 - 07/30/04 10:56 PM
Re: FLOOD: 3 Websites - Conflicting Information
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10K Club
Joined: Nov 2000
Posts: 18,763
Central City, NE
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Quote:
From page 16 of the Mandatory Purchase of Flood Insurance Guidelines:
Consequently, lenders regulated by, or whose deposits are insured by, Federal entities for lending regulation may make conventional loans secured by mortgages on buildings and mobile homes in SFHAs in nonparticipating communities. They may do so notwithstanding the fact that such property is not eligible for the purchase of National Flood Insurance. Lenders are still required to observe the provisions of the Federal laws and regulations governing the NFIP related to making determinations and providing notice, even though the requirement to purchase flood coverage does not apply.
From page 26:
Upon learning the location of the mobile home, the lender must use its best efforts to determine whether the mobile home is in an SFHA, notify the borrower, and mandate the purchase of any required flood insurance .
Thanks for the support Dan. My "yes" was in response to the "care to elaborate" statement. I took too long to post to be next, obviously.
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#218293 - 08/02/04 11:49 AM
Re: FLOOD: 3 Websites - Conflicting Information
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Gold Star
Joined: Feb 2003
Posts: 368
Here & There
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This can get tricky at times, but in simple terms, decide whether the unit is manufactured home, or an RV. We could go on and on with many factors to consider, but for flood purposes, the wheels/axle stmt above is the simplest. If the unit rests on wheels, it is not permanent and can be moved easily; conversely, if the unit rests on anything other than its wheels, it should be considered "affixed," "attached," or "just there" for flood purposes and the determination form should be prepared.
Use your best information on where the unit will be located, which is not always the location at closing---it may be on the dealers lot, or even at the manufacturer.
This may contradict local laws and other regs as to whether the unit is permanent or not, but IMO is not an overly conservative application of the flood regs.
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#218294 - 08/02/04 01:32 PM
Re: FLOOD: 3 Websites - Conflicting Information
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10K Club
Joined: Aug 2002
Posts: 47,535
Bloomington, IN
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Quote:
Use your best information on where the unit will be located, which is not always the location at closing---it may be on the dealers lot, or even at the manufacturer.
I disagree with this. You must do a determination based on the permanent location of the MH. If that is not known at closing then you are do the determination as soon as you learn of the permanent location. BTW, we will not close a MH loan until the permanent location is known.
Quote:
If the unit rests on wheels, it is not permanent and can be moved easily; conversely, if the unit rests on anything other than its wheels, it should be considered "affixed," "attached," or "just there" for flood purposes and the determination form should be prepared.
I'm not sure what you are saying, but it does not matter whether the MH is affixed or not as for making the determination and sending the SFHA notice if applicable. These 2 requirements are always present, even when the structure is located in a nonparticipating community.
If the MH is not affixed or the structure is located in a nonparticipating community, flood insurance is not available, but the determination and notice requirements remain.
_________________________
The opinions expressed are mine and they are not to be taken as legal advice.
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#218295 - 08/02/04 01:32 PM
Re: FLOOD: 3 Websites - Conflicting Information
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Gold Star
Joined: Jan 2004
Posts: 318
USA
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Dan, your cite applies to instances in which a mobile home is located in a nonparticipating community, in which case a flood determination must still be obtained even though National Flood Insurance is not available. It doesn't address the question of whether a flood determination is required if the mobile home is not affixed. Quote:
I believe that a bank should follow all of the Flood requirements for all mobile homes.
David, is that your personal belief, or a regulatory requirement? If you are saying it is a regulatory requirement, then you are contradicting Mary Beth Guard's statement when she said "If the mobile home is not affixed, the flood determination requirement does not apply."
The bottom line is, if the mobile home is not affixed, it doesn't meet the definition of a mobile home under the flood rules and there is no requirment to obtain a flood determination. It may be a good idea to get one anyway as you pointed out, but there is no regulatory requirement to do so, your personal belief notwithstanding.
_________________________
CRCM, CAFP, DAD
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#218296 - 08/02/04 01:37 PM
Re: FLOOD: 3 Websites - Conflicting Information
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Gold Star
Joined: Jan 2004
Posts: 318
USA
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Quote:
If the MH is not affixed or the structure is located in a nonparticipating community, flood insurance is not available, but the determination and notice requirements remain.
Dan, you also are contradicting Mary Beth Guard's statement that a determination is not required if the mobile home is not affixed. On what are you basing your conclusion?
_________________________
CRCM, CAFP, DAD
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#218297 - 08/02/04 01:38 PM
Re: FLOOD: 3 Websites - Conflicting Information
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10K Club
Joined: Nov 2000
Posts: 18,763
Central City, NE
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Quote:
David, is that your personal belief, or a regulatory requirement? If you are saying it is a regulatory requirement, then you are contradicting Mary Beth Guard's statement when she said "If the mobile home is not affixed, the flood determination requirement does not apply."
The bottom line is, if the mobile home is not affixed, it doesn't meet the definition of a mobile home under the flood rules and there is no requirement to obtain a flood determination. It may be a good idea to get one anyway as you pointed out, but there is no regulatory requirement to do so, your personal belief notwithstanding.
I believe that this is the regulatory requirement. The definition of mobile home does NOT say that it has to be anchored or tied down. It says it must be "built on a permanent chassis and designed for use with or without a permanent foundation." It goes on to say "mobile home means a mobile home on a permanent foundation." However, "permanent foundation" is not defined.
To purchase insurance, a mobile home must be anchored, but this doesn't mean that if a MH is not anchored, you are exempt from the flood requirements.
Additionally, there was a bank that was sued for $16 million following the 1993 flooding in Des Moines, Iowa because they took the stance that they didn't need to follow the Flood rules for MH's that were not tied down.
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#218298 - 08/02/04 02:00 PM
Re: FLOOD: 3 Websites - Conflicting Information
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Gold Star
Joined: Jan 2004
Posts: 318
USA
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Quote:
It goes on to say "mobile home means a mobile home on a permanent foundation." However, "permanent foundation" is not defined.
So are you saying that even if the mobile home is not on a permanent foundation, a flood determination must be obtained? In other words, Mary Beth Guard's statement is inaccurate?
Quote:
Additionally, there was a bank that was sued for $16 million following the 1993 flooding in Des Moines, Iowa because they took the stance that they didn't need to follow the Flood rules for MH's that were not tied down.
Did the bank lose?
_________________________
CRCM, CAFP, DAD
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#218299 - 08/02/04 03:18 PM
Re: FLOOD: 3 Websites - Conflicting Information
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10K Club
Joined: Aug 2002
Posts: 47,535
Bloomington, IN
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Quote:
Dan, you also are contradicting Mary Beth Guard's statement
Unfortunately I am, and I cannot find any hard copy in the regulation to validate my standing. Based on our policy, and the policy of all my previous employers, not to lend on a MH until the permanent location was know may have skewed my thinking.
It does appear from my reading trying to support my position that a MH does not meet the definition of a "building" until it is set on a permanent foundation, however a permanent foundation is not defined that I could find. Therefore, it is my belief once the mobile home is set on blocks and hooked to the utilities you must do the determination and follow the notification requirements if applicable. If the MH is not anchored then you would be required to have the borrowers anchor the MH and acquire FI, or you would not be able to make the loan, unless the MH was located in a nonparticipating community.
_________________________
The opinions expressed are mine and they are not to be taken as legal advice.
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#218301 - 08/02/04 04:07 PM
Re: FLOOD: 3 Websites - Conflicting Information
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Anonymous
Unregistered
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Quote:
It does appear from my reading trying to support my position that a MH does not meet the definition of a "building" until it is set on a permanent foundation, however a permanent foundation is not defined that I could find. Therefore, it is my belief once the mobile home is set on blocks and hooked to the utilities you must do the determination and follow the notification requirements if applicable. If the MH is not anchored then you would be required to have the borrowers anchor the MH and acquire FI, or you would not be able to make the loan, unless the MH was located in a nonparticipating community.
Dan, I agree with your analysis. If a mobile home is on blocks and the utilities connected, I would consider it affixed, and the flood determination requirement would apply.
Quote:
I'm saying that a MH MUST be on a permanent foundation, but this term is not defined.
David, first you said a flood determination must be obtained even if the mobile home is not affixed, now you're saying a mobile home must be on a permanent foundation before a flood determination is required. Can you give me an example of a mobile home that is on a permanent foundation but not affixed? Maybe we have a different definition of affixed.
Perhaps we should just say you are confusing the heck out of me and leave it at that.
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#218302 - 08/02/04 04:09 PM
Re: FLOOD: 3 Websites - Conflicting Information
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Gold Star
Joined: Jan 2004
Posts: 318
USA
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Oops, the previous post was mine, I forgot to log in.
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#218303 - 08/02/04 04:24 PM
Re: FLOOD: 3 Websites - Conflicting Information
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10K Club
Joined: Nov 2000
Posts: 18,763
Central City, NE
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Quote:
David, first you said a flood determination must be obtained even if the mobile home is not affixed, now you're saying a mobile home must be on a permanent foundation before a flood determination is required. Can you give me an example of a mobile home that is on a permanent foundation but not affixed? Maybe we have a different definition of affixed.
Perhaps we should just say you are confusing the heck out of me and leave it at that.
Funny, I thought I was saying the same thing Dan was saying. If it is on blocks and hooked up to utilities, it is on a permanent foundation (you agreed to that), but it is not affixed. Affixed to me means tied down, as required by FEMA to purchase flood insurance.
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#218304 - 08/02/04 05:25 PM
Re: FLOOD: 3 Websites - Conflicting Information
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Gold Star
Joined: Jan 2004
Posts: 318
USA
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Quote:
If it is on blocks and hooked up to utilities, it is on a permanent foundation (you agreed to that), but it is not affixed. Affixed to me means tied down, as required by FEMA to purchase flood insurance.
So we're back where we started from, because Mary Beth Guard's answer says the mobile home has to be affixed before the flood determination requirement kicks in. I think the tie down requirement comes into play when you are talking about flood insurance, but not necessarily for flood determinations.
It may be just a matter of semantics. I think in the end we are all in agreement that if the MH is on a permanent foundation (which to me means affixed), a flood determination is required.
_________________________
CRCM, CAFP, DAD
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#218305 - 08/02/04 05:32 PM
Re: FLOOD: 3 Websites - Conflicting Information
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Gold Star
Joined: Feb 2003
Posts: 368
Here & There
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Quote:
You must do a determination based on the permanent location of the MH. If that is not known at closing then you are do the determination as soon as you learn of the permanent location. BTW, we will not close a MH loan until the permanent location is known.
..........
I'm not sure what you are saying, but it does not matter whether the MH is affixed or not as for making the determination and sending the SFHA notice if applicable.
What I'm saying is that the lender may not know the exact location on the site, that the Home will be placed if it a proposed situation. If not, the Lender should use the best information available at that time to ascertain the flood issues "before closing". You can come back later to do a second flood determination, if prudent, after the unit is set in place. (On larger tracts, the final placement location may differ than that proposed--sometimes by feet, sometimes more)
The second issue is how you define a mobile home? What makes one unit a manufactured home and another an RV? There are many criteria, but the simplest is borrowers' intent. After that, mobility of the unit---thus a unit resting on wheels is a good factor. We do a few RV loans and do not work up flood determinations for them.
These are not ways to avoid compliance (although some buyers, and lenders would like to find a loophole), rather to assure compliance and mitigate risk to the bank.
Now, maybe tomorrow we can talk about houseboats vs. houses that can float 
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