We have a potential loan secured by a 10 acre property that has 2 houses, one large house and one small house, and 4 other detached structures. All of the property is in a special flood zone. The applicants live in the large house, and rent the small house to a tenant. One of the other detached structures is used as a garage for the applicants personal vehicles. The other 3 detached structures aren't being used. The applicants' current lender only requires flood insurance on the 2 houses. As I understand it, the structure being used as a garage for their personal cars would be exempt. I'm struggling with the 3 unused structures though. As I read the reg and the preamble in the federal register, only structures that are for residential use are allowed to be exempt. Therefore, the 3 unused structures would have to have flood insurance. Does anyone else have a different take on this?

if the structure is used primarily for personal, family, or household purposes, and not used primarily for agricultural, commercial, industrial, or other business purposes;

If it is not being used for agricultural, commercial, industrial, or other business purposes - then it must be the first one even if they are sitting there empty.

As Randy pointed out, the "Detached Structure" exemption applies to any building used for personal, family or household purposes. Here's how we explain it in our Flood Insurance training manual:

A bank does not have to require flood insurance for qualifying detached structures that do not serve as a residence. However, lenders should account for any safety and soundness considerations.

1. Qualifications:
Each of following must be met:
a. Multiple Buildings: There must be more than one building on the property.

b. Residence Structure: One building must serve as a residence (sleeping, bathroom or kitchen facilities).

c. Structure Purpose: The detached structure(s) must be used primarily for personal, family, or household purposes. However, it cannot serve as a residence (sleeping, bathroom or kitchen facilities).


2. Loan Purpose vs. Structure Purpose:

a. Loan purpose DOES NOT matter.

b. Structure purpose DOES matter.

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Since you have multiple buildings and at least one serves as a residence, you need to look at the use of the other buildings. If they aren't being used for commercial/ag purposes, I think you can easily say they are for personal use. Maybe they are used to store their "stuff" or are simply vacant.