I have read through many threads and resources and I don't see this particular situation addressed. Our applicant owns rural land with an inhabitable cabin located thereon and a pole barn, the cabin is in flood zone A. Applicant would like a construction loan to build a house intended to be outside the flood zone. The SFHD our ops team pulled states "Main residence in Zone A. All other structures are subject to Zone C." Our SFHD says Zone A because the cabin is in zone A. My thinking is we need to require flood insurance at origination (or when the slab is poured but I don't think we want to start using that process) for the proposed construction and customer can have the flood determination updated when the cabin has been demolished and the new property has been built (maybe when footings are set?). Feel free to correct me if you disagree.

Does anyone know the process to change the determination post-construction? We aren't trying to change the mapping, merely changing the location of the structure to an area already mapped as outside of a flood zone. I am wondering if we just request a new SFHD that again uses aerial photography to delineate the structure location?

Our applicant owns rural land with an inhabitable cabin located thereon and a pole barn, the cabin is in flood zone A.

You will have to have flood insurance in place on the cabin at or before the loan closes unless the cabin is demolished before the loan closes.

If the new construction is outside the SFHA boundary you will not need flood insurance on that structure nor, if I understand your post, will you have to have a remapping. If any portion of the property in located in SFHA then the whole property is in. However the structures on the property can be located outside the SFHA boundary line and not require flood insurance.

Thanks for the response Dan. I misstated the cabin, it is uninhabitable and I just misstated. The appraiser was very clear about that.

The security for the construction loan will be the property to be built, not the cabin. The cabin is uninhabitable, however it is walled and roofed. Applicant intends to demolish the cabin as part of the construction phase, but we are currently uncertain of the timing. The construction has not begun in any way so I am not certain how we validate that it wont be in a flood zone, or when we are even able to or allowed to. I feel like the foundation should be poured before we could begin to validate the actual location of the construction.

Does that change your answer at all?

The security for the construction loan will be the property to be built, not the cabin.

Then you are going to have to structure your deed of trust or your mortgage to exclude the cabin, as the typical real estate security interest agreement gives you an interest in any and all improvements. Your intentions or how you value the collateral is not a consideration. Walled and roofed means it is an insurable structure - inhabitable or not.

As for the new structure, you don't have building plans and a survey of the location? What if they pour the foundation and it crosses a property line?

Thank you for the heads up about the security instrument.

You get to my next issue. We have the plans for dwelling construction. From myy discussion with the lender and UW, we do not yet have any location specific plans document or surveyor report. I went on the FEMA website and my address has no digital mapping even.

Any advice on how I ultimately can determine the new dwelling is not in a flood zone/cancel flood insurance?

The plans do not indicate elevation by fill. There is no disagreement with the map that I am aware of, the area is bluffs/hilly terrain and the uninhabitable cabin is in a valley that has flood zone A. I am thinking we will have to request a redetermination once the cabin is demolished. Thoughts? Contact AFR directly for advice? Contact FEMA?

No, it does not change my answer and I agree with what Randy has stated.

Unless you specifically have your attorney eliminate the cabin from the security agreement, mortgage, DOT, etc. then your loan is secured by the cabin. As Randy stated inhabitable or not it meets the definition of a building and flood insurance would be required.

And to echo Randy comment about not having building plans, how was the construction loan approved without knowing the housing costs/plans and the location of the construction on the property?

If the loan has closed and the cabin is still standing I would venture to guess you have at least 3 flood violations, 1) Most likely the notice was not provided, 2) the loan was closed without flood insurance on the cabin, 3) you have not maintained flood insurance for the life of the loan.

Until you get a copy of the survey to show the location of the new construction on the property you have no means to determine if it will be located within the SFHA boundary and most importantly without the survey you have no supporting documentation to justify no longer requiring the flood insurance.

The loan has not closed. The UW and I have agreed the options for closing are:
1. Flood insurance is required on the proposed construction. We do not include the cabin in the security instrument/mortgage/deed of trust.
2. Flood insurance is required for both the proposed construction and the cabin. We would need to establish RCV on the cabin via the homeowner’s insurance.
3. Demolish the cabin prior to closing, no need to concern ourselves with insurance or the security on the cabin. Flood insurance is required on the proposed construction still.

My understanding is the lender is intending option 2, flood for both structures.

As for removing flood insurance for the new construction, I am no expert on the process. Would our lender already have a survey? I guess I was thinking the survey would happen later in the process. Can we just submit a survey showing intended location to AFR? My assumption was they would want something more definitive, like footers at least, to determine the location of the property to ensure no part of the structure is in the flood zone.

I'm not sure what agency AFR is.

If you have plans that show the location of the new construction you should be able to submit that to your determination vendor and they should be able to tell you if the construction will be located within the SFHA boundaries.

Just as a side note and personal opinion - proceeding with the loan without knowing where the new construction will be located on the property is a risky transaction and it is something we would not allow.

AFR = American Flood Research, our determination vendor.

Thanks for all of your help.

As an aside I guess I am not entirely sure why the lack of precise location is that risky. They aren't going to build inside a river, the builder is local and familiar with the terrain, etc. The structure could be outside the property boundary?

Bottom line is that a portion of the property on which the new building is going to be constructed is in a SFHA. Unless you know exactly where the structure is going to be located, you cannot make a determination in relationship to the SFHA and the borrower will not be able to purchase flood insurance as the agent is going to have no idea the premium rating to assign to the structure. It is as simple as that.

Thanks to both of you for all of your input. I have read many many threads on here and appreciate all the input you have provided in the forum. In fact I rarely post as I can normally find a thread where you already addressed whatever issue I'm researching. I was not happy when you guys were down a few hours the other day.