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#2209518 - 03/26/19 03:55 PM Blanket Flood Coverage purchased by Borrower
palmertown Offline
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Joined: Nov 2004
Posts: 64
Pennsylvania
We have a borrower that has a blanket flood policy covering 576 locations totaling $150,000,000. Only one of these locations is collateral for our loan. We have informed the lender that this is not sufficient coverage as it works out to about $260,000 per location. The lender is fighting us and saying that not all 576 locations are going to flood at once.

Although logically I agree with the lender, I do not believe that this complies with the flood rule.

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Flood Compliance
#2209532 - 03/26/19 04:26 PM Re: Blanket Flood Coverage purchased by Borrower palmertown
Norman Paperman Offline
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Norman Paperman
Joined: Aug 2012
Posts: 1,636
48.934476, -114.343735
Ever heard of that guy Noah?

What is your loan amount, and the ACV of the property? I assume these are commercial buildings?
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#2209547 - 03/26/19 05:15 PM Re: Blanket Flood Coverage purchased by Borrower Norman Paperman
palmertown Offline
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Joined: Nov 2004
Posts: 64
Pennsylvania
These are commercial buildings. The individual property is worth $3 million and the loan is for $2 million.

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#2209563 - 03/26/19 06:22 PM Re: Blanket Flood Coverage purchased by Borrower palmertown
rlcarey Online
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rlcarey
Joined: Jul 2001
Posts: 76,988
Galveston, TX
Betcha the deductible is at least that.
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#2209633 - 03/27/19 12:38 PM Re: Blanket Flood Coverage purchased by Borrower rlcarey
palmertown Offline
Member
Joined: Nov 2004
Posts: 64
Pennsylvania
Can anyone tell me if I am correct in how I am calculating the coverage for this loan? Does anyone else have experience with Blanket flood coverage purchased by the borrower and if so, how do you handle it?

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#2209635 - 03/27/19 12:49 PM Re: Blanket Flood Coverage purchased by Borrower palmertown
rlcarey Online
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rlcarey
Joined: Jul 2001
Posts: 76,988
Galveston, TX
You would have to read the policy and see what and how it covers the individual buildings. Blanket policies are usually not divided by the number of buildings to determine individual building coverage, like a RCBAP.

If the policy does not contain the "compliance aid" statement, then you are going to have to make the determination as to whether or not the policy meets the requirements of 12 CFR 208.25(b)(9) or your regulator's corresponding regulation. If it meets the requirements of that section, you must accept it. If it does not, then you could still accept it, if it meets 208.25(b)(3)(iii).

With the July 1, 2019 deadline approaching on these new requirements, the last thing you really want to do is accept the policy now and be faced with rejecting it at the time of the next policy renewal.
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