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#2259540 - 09/10/21 04:43 PM Value Different for Structure on Hazard than Flood
Nids Offline
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Joined: Mar 2014
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Not sure how to approach the borrower on this one. The property has no home, but does have a stand alone garage, which is in a flood zone. They have provided documentation for hazard insurance based on $25k ACV, but for flood insurance they only provided based on $2,500 ACV. So they are using two different values for the same structure for hazard insurance as compared to flood insurance. When asked if it was a typo they said, no, using the $25,000 value made flood insurance too expensive and the building has flooded several times so I don't want to pay that much. My go to is to quote regulatory requirements, typically. Can anyone guide me on the best way to address this situation?

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Flood Compliance
#2259584 - 09/10/21 09:12 PM Re: Value Different for Structure on Hazard than Flood Nids
Dan Persfull Offline
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Dan Persfull
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Posts: 46,364
Bloomington, IN
They have provided documentation for hazard insurance based on $25k ACV, but for flood insurance they only provided based on $2,500 ACV. So they are using two different values for the same structure for hazard insurance as compared to flood insurance. When asked if it was a typo they said, no, using the $25,000 value made flood insurance too expensive and the building has flooded several times so I don't want to pay that much.

IMHO tell them to take the loan to another lender and file a SAR on both the applicant and insurance agent for fraud.
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#2259585 - 09/10/21 09:33 PM Re: Value Different for Structure on Hazard than Flood Nids
rlcarey Online
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rlcarey
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Galveston, TX
Well there is no fraud. They can insure the property for whatever they want too. If that does not meet your requirements they are free to walk down the street to the next bank.
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#2259609 - 09/13/21 01:23 PM Re: Value Different for Structure on Hazard than Flood Nids
Dan Persfull Offline
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Dan Persfull
Joined: Aug 2002
Posts: 46,364
Bloomington, IN
I agree they can insure for whatever amount they choose but it does appear they are misrepresenting the value of the property to the bank on the flood insurance policy.
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The opinions expressed are mine and they are not to be taken as legal advice.

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#2259610 - 09/13/21 01:42 PM Re: Value Different for Structure on Hazard than Flood Nids
rlcarey Online
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rlcarey
Joined: Jul 2001
Posts: 76,928
Galveston, TX
I would think the agent is misrepresenting the value of the property to NFIP and not the bank, as the bank has to make their own determination. On a garage, I am not sure it really makes any difference. If this was a RCBAP policy, that would be a lot different. I am not sure that the assigned ACV on a general policy means anything.
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The opinions expressed here should not be construed to be those of my employer: PPDocs.com

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