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#910731 - 02/26/08 08:28 PM
FLOOD CLARIFICATION
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100 Club
Joined: Oct 2005
Posts: 248
Florida
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I have a loan to a gas station which has a big lot, the structure RCV is $155,000 and they also have a car wash with a RCV of $30,000. How much Flood coverage would I need. The loan is for $1,750,000. Also, if you have a policy written for both structures is there anything requiring you to have seperate policies? IF my RCV total $185,000, and in case of a flood damage FEMA will cover RCV why would I make the borrower carry %500,000. I appreciate comments on this, I'm currently battleling an issue, to me the lesser of the three amounts it's what I would need but I would like some opinions. Thank you.
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#910756 - 02/26/08 08:51 PM
Re: FLOOD CLARIFICATION
Rather be in Vegas
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Gold Star
Joined: Feb 2003
Posts: 368
Here & There
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This cheatsheet in the Lending section may help you. click Here to access it, and click open when prompted.
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#910782 - 02/26/08 09:15 PM
Re: FLOOD CLARIFICATION
tuma
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10K Club
Joined: Aug 2002
Posts: 47,679
Bloomington, IN
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. . . is there anything requiring you to have seperate policies? From page 28 of the Mandatory Purchase Guidelines: For multiple buildings, the lender must ensure that a separate flood insurance policy is provided for each building requiring coverage. The NFIP allows one policy per building.
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The opinions expressed are mine and they are not to be taken as legal advice.
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#910843 - 02/26/08 10:07 PM
Re: FLOOD CLARIFICATION
Dan Persfull
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100 Club
Joined: Oct 2005
Posts: 248
Florida
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What would you say the required amount should be? I understand it should be the lesser of the three (loan Bal./RCV/$500M).
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#910977 - 02/27/08 05:50 AM
Re: FLOOD CLARIFICATION
Rather be in Vegas
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10K Club
Joined: Jul 2001
Posts: 84,366
Galveston, TX
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"IF my RCV total $185,000, and in case of a flood damage FEMA will cover RCV why would I make the borrower carry %500,000."
If you are dealing with commercial properties, the figure you are looking for is RCV minus depreciation. Only condos and primary residences are based on RCV.
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The opinions expressed here should not be construed to be those of my employer: PPDocs.com
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#911042 - 02/27/08 02:24 PM
Re: FLOOD CLARIFICATION
rlcarey
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10K Club
Joined: Nov 2002
Posts: 20,656
The Swamp
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Randy, I understand that is how the insurance company, upon loss, will pay out...but it looks to me like that when dealing with the "lesser of's", the guides specify RCV or overall value - land (same thing if using cost sections)rather than ACV (when calculating coverage requiremeents, not insurance rules) IOW, the "compliance rules" only state RCV. The Loss Payments (insurance rules) section is where they discuss the different payouts, RCV vs ACV. And that will depend on owner occupied vs non even on residential properties.
I see nowhere that you can lessen the compliance requirement by the depreciation factor...could you please clarify where you are pulling this from (again, from a compliance standpoint)
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My opinion only. Not legal advice. Say you'll haunt me - Stone Sour
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#911065 - 02/27/08 02:43 PM
Re: FLOOD CLARIFICATION
RR Joker
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10K Club
Joined: Jul 2001
Posts: 84,366
Galveston, TX
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It goes to one of the three limitation tests:
"The maximum amount of coverage available under the NFIP for the particular type of building"
You cannot insure a commercial building for RCV - you can only insure it up to ACV. If I have a commercial building with an RCV of $1,000,000, but an ACV of $200,000 - you can't make the borrower buy $500,000 of insurance when it will only pay out $200,000.
The clause that talks about the maximum amount of insurance available for that particular building type means more than just the maximum amount of insurance that could possibly be purchased (i.e. $500,000).
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The opinions expressed here should not be construed to be those of my employer: PPDocs.com
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#911163 - 02/27/08 03:33 PM
Re: FLOOD CLARIFICATION
rlcarey
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10K Club
Joined: Nov 2002
Posts: 20,656
The Swamp
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Hummm...just another contradiction within the guidelines once again. I wonder how many lenders take this into consideration on 1-4 residential rental properties or second homes.
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My opinion only. Not legal advice. Say you'll haunt me - Stone Sour
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#911675 - 02/27/08 08:35 PM
Re: FLOOD CLARIFICATION
RR Joker
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10K Club
Joined: Nov 2002
Posts: 20,656
The Swamp
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bumping this back up to make sure there are no comments to the 1-4 rental/second home...that the assumption would be the same as if they were commercial properties...
Then look at this too...we have harped and harped in posts about insuring condo's to the full RCV...well wow...what if the majority are not occupied more than 80% of the preceeding 365 days!
But then...RCBAP's have their own loss settlement provisions. Hummmm...another missing link if you rely on the loss payment insurance section and not the coverage calculation (compliance) section. Oh...and too add to the maddness...special loss settlemtns apply to mobilehomes as well!
The only [i]consistency [i]is found within the calculating coverage for compliance section...which never deviates from RCV! Something is missing here, Randy...is it just me??
Last edited by RR joker; 02/27/08 08:41 PM.
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My opinion only. Not legal advice. Say you'll haunt me - Stone Sour
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#912459 - 02/28/08 09:06 PM
Re: FLOOD CLARIFICATION
RR Joker
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10K Club
Joined: Jul 2001
Posts: 84,366
Galveston, TX
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I agree that there still are some inconsistencies.
However, I would suggest that you rely on page 28:
(3) Loss Payments
Lenders should seek the assistance of property insurance agents or companies when determining the appropriate flood insurance coverage amounts, as they do for other lines of insurance.
It comes down to the fact that you are not going to force someone to insure a building for more than the possible loss payment.
It still is going to come down to what form of policy is being purchased.
There are no occupancy requirements on condos that impact the insurance coverage, unless you are also requiring a dwelling policy on top of the RCBAP.
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The opinions expressed here should not be construed to be those of my employer: PPDocs.com
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#912467 - 02/28/08 09:13 PM
Re: FLOOD CLARIFICATION
rlcarey
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10K Club
Joined: Nov 2002
Posts: 20,656
The Swamp
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Thanks for taking another stab at this Randy...it's driving me nuts! I really don't like inconsistencies!
And right, I was referring to additional dwelling coverage on the condo's over and above the RCBAP and the implications of such depending on owner vs non-owner payout. This affects regular rental property as well...using ACV rather than RCV...this is a calculation nightmare really.
If you use the cost section on the appraisal...that's based on current costs, or RCV. Appraisal - land is market based...getting a grasp on ACV is not an easy thing to do!
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My opinion only. Not legal advice. Say you'll haunt me - Stone Sour
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#912490 - 02/28/08 09:29 PM
Re: FLOOD CLARIFICATION
itsme
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10K Club
Joined: Jul 2001
Posts: 84,366
Galveston, TX
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Replacement Cost Value and Actual Cost Value.
Replacement Cost Value is the cost to reconstruct the property in today's dollars.
Actual Cost Value is the cost to reconstruct the property in today's dollars minus depreciation.
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The opinions expressed here should not be construed to be those of my employer: PPDocs.com
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#920769 - 03/12/08 03:38 PM
Re: FLOOD CLARIFICATION
Ninky
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10K Club
Joined: Jul 2001
Posts: 84,366
Galveston, TX
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Refer to Loss Payments on page 28 of the MFPIG.
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The opinions expressed here should not be construed to be those of my employer: PPDocs.com
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