Skip to content
BOL Conferences
Thread Options
#2210007 - 04/01/19 05:42 PM Detached structure exemption and the flood notice
Margarita Offline
Member
Joined: Oct 2005
Posts: 74
Wisconsin
If the flood determination results are that the primary structure is out but a secondary structure is in and you apply the detached structure exemption to the secondary structure and flood insurance is not required, do you still provide the notice and have the client sign the flood notice?

I feel we should because the property is still in a flood zone but the bank is just not requiring flood insurance. The notice notifies the client of their rights and also that flood insurance is available should they want it.

I have read the flood rules and the FDIC flood rules on the exemption and the notice sections but with no clarification. When checking with other compliance resources I have received answers both ways - yes you still have to supply the notice and no you are not requiring flood insurance so they don't need the notice.

Anyone have a definitive answer on this? I am concerned with how an FDIC examiner would look at this.

Thank you!

Return to Top
Flood Compliance
#2210056 - 04/02/19 12:17 PM Re: Detached structure exemption and the flood notice Margarita
Adam Witmer Offline
Power Poster
Joined: Sep 2010
Posts: 2,658
I agree with you that the notice is still required as the detached structure exemption only applies to the purchase of insurance requirements of flood rules.
_________________________
Adam Witmer, CRCM

All statements are my opinion, not those of my employer, and should not be taken as legal advice.
www.compliancecohort.com

Return to Top
#2210187 - 04/02/19 10:30 PM Re: Detached structure exemption and the flood notice Margarita
David Dickinson Offline
10K Club
David Dickinson
Joined: Nov 2000
Posts: 18,762
Central City, NE
I also agree that you MUST provide the notice. And you'll want to for liability reasons. There is no exemption from the SFHDF or Notification. There's only an exemption from the insurance purchase.

This is another example of why this regulation needs to be updated: You're giving them a notice that tells them they must get flood insurance, but then you're telling them you're not requiring it under the detached structure exemption.
_________________________
David Dickinson
http://www.bankerscompliance.com

Return to Top
#2210190 - 04/02/19 10:46 PM Re: Detached structure exemption and the flood notice Margarita
Margarita Offline
Member
Joined: Oct 2005
Posts: 74
Wisconsin
Thank you very much for the feed back!

Return to Top
#2210207 - 04/03/19 01:07 PM Re: Detached structure exemption and the flood notice Margarita
Dan Persfull Offline
10K Club
Dan Persfull
Joined: Aug 2002
Posts: 47,517
Bloomington, IN
If you read through the final rule you will find where they specifically updated Appendix A (the notice) to include the statement:

Although you may not be required to maintain flood insurance on all structures, you may still wish to do so, and your mortgage lender may still require you to do so to protect the collateral securing the mortgage. If you choose not to maintain flood insurance on a structure and it floods, you are responsible for all flood losses relating to that structure.

There was no intention to, and the final rule does not, waive the notice requirements and those that have not been providing it are subjecting themselves to potential CMPs.
_________________________
The opinions expressed are mine and they are not to be taken as legal advice.

Return to Top
#2210254 - 04/03/19 03:19 PM Re: Detached structure exemption and the flood notice Margarita
Margarita Offline
Member
Joined: Oct 2005
Posts: 74
Wisconsin
Thank you Dan. I have always had the lenders provide the notice but was recently challenged on it and I couldn't point to a specific statement that it must be provided. I didn't think to use the notice itself. Thank you again!

Return to Top