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#1966550 - 10/02/14 05:27 PM Detached Structures do not require flood Insurance
piggybanker Offline
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Joined: Dec 2005
Posts: 63
This flood insurance kinda makes me nervos... Just making sure I am thinking correctly.. If the property is in a flood zone and has a residential home on it and an additional storage building on it. We are only required to have flood insurance on the residential home and not the storage building.

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Flood Compliance
#1966573 - 10/02/14 06:06 PM Re: Detached Structures do not require flood Insurance piggybanker
rlcarey Online
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That is correct. Detached structures on loans secured by residential property no longer require flood insurance. The bank can always require it if they so wish from a safety and soundness perspective.
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#1966589 - 10/02/14 06:23 PM Re: Detached Structures do not require flood Insurance piggybanker
piggybanker Offline
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Ok...Do we have to include any language telling the customer that they are in flood but we are not requiring flood and they would be responsible for losses?

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#1966594 - 10/02/14 06:30 PM Re: Detached Structures do not require flood Insurance piggybanker
rlcarey Online
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rlcarey
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Galveston, TX
No. Not by regulation.
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#1971998 - 10/24/14 08:49 PM Re: Detached Structures do not require flood Insurance piggybanker
sbrelje Offline
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Would a detached garage at a second home be Residential Property?

What about a detached garage at a rental 1 family home?

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#1972001 - 10/24/14 08:57 PM Re: Detached Structures do not require flood Insurance piggybanker
John Burnett Offline
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The second home and rental are both residential structures. The detached garages in both cases, unless they include living quarters, are exempt from the mandatory flood insurance requirements.

You may still want to require flood coverage on those garages to protect your interest in the collateral.
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#1972011 - 10/24/14 09:21 PM Re: Detached Structures do not require flood Insurance John Burnett
sbrelje Offline
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Thanks John!

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#1972750 - 10/29/14 05:27 PM Re: Detached Structures do not require flood Insurance sbrelje
sbrelje Offline
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I want to make sure I am reading this correctly.

SEC. 13. EXCLUSION OF DETACHED STRUCTURES FROM MANDATORY
PURCHASE REQUIREMENT.
(a) EXCLUSION.—Subsection (c) of section 102 of the Flood Disaster
Protection Act of 1973 (42 U.S.C. 4012a(c)) is amended by adding at the end the following new paragraph:
(3) DETACHED STRUCTURES.—Notwithstanding any other
provision of this section, flood insurance shall not be required,in the case of any residential property, for any structure thatis a part of such property but is detached from the primary residential structure of such property and does not serve as a residence.

If we have a loan secured by a lot with just a garage, flood insurance isn't required. (There are no living quarters in the garage and the home is on a seperate lot)

I understand insurance will need to be considered for safety and soundness, but by law it isn't required?

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#1972766 - 10/29/14 05:49 PM Re: Detached Structures do not require flood Insurance piggybanker
niche girl Offline
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Typically detached garages-when actually used as vehicle garages- are the only detached structures aleady covered under the home flood policy and do not require a separate policy to insure anyway.
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#1972837 - 10/29/14 07:36 PM Re: Detached Structures do not require flood Insurance piggybanker
sbrelje Offline
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Isn't that only if the garage is on the same lot as the home and only for 10% of the limit of liability on the dwelling?

Last edited by Comped; 10/29/14 07:38 PM.
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#1972890 - 10/29/14 08:47 PM Re: Detached Structures do not require flood Insurance piggybanker
TMatt87 Offline
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(3) DETACHED STRUCTURES.—Notwithstanding any other
provision of this section, flood insurance shall not be required,in the case of any residential property, for any structure thatis a part of such property but is detached from the primary residential structure of such property and does not serve as a residence.

We have a loan where there is a detached garage with an apartment above it. However, the borrower doesn't use the apartment for anything other than storage. It doesn't currently "serve as a residence, but it could at any time." Still require flood?
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#1972901 - 10/29/14 09:07 PM Re: Detached Structures do not require flood Insurance piggybanker
David Dickinson Offline
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I would say that's not an apartment. What would make it an apartment if no one resides there or will?

BUT . . .
(3) DETACHED STRUCTURES.—Notwithstanding any other
provision of this section, flood insurance shall not be required,in the case of any residential property, for any structure thatis a part of such property but is detached from the primary residential structure of such property and does not serve as a residence.

IF there's no residence and only a garage, how do you qualify this property as a residential property? I don't think a garage by itself meets the exemption from flood insurance coverage.
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#1973548 - 10/31/14 08:47 PM Re: Detached Structures do not require flood Insurance piggybanker
sbrelje Offline
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That's what I was afraid of.

Thanks David.

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#1974055 - 11/04/14 07:33 PM Re: Detached Structures do not require flood Insurance piggybanker
City Girl Offline
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Regarding detached structures, if we still require flood insurance are they still required to be on separate policies?

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#1974071 - 11/04/14 08:04 PM Re: Detached Structures do not require flood Insurance piggybanker
EGeis1 Offline
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I thought FEMA required flood insurance on accessory structures unless it was valued at less than $5000? Did that change?

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#1974109 - 11/04/14 09:10 PM Re: Detached Structures do not require flood Insurance piggybanker
Dan Persfull Online
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Yes. See post #1972750 on page 1 of this thread.
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#1974748 - 11/06/14 03:45 PM Re: Detached Structures do not require flood Insurance piggybanker
NotDoneYet Offline
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piggybanker, you may find what you are looking for here, although I haven't been following flood to know if it is in effect or not:

Dodd-Frank Sec.13 Exclusion of Detached Structures from Mandatory Purchase Requirement.
(b) RESPA Statement is amended-
(1) by inserting the following statement: 'Although you may not be required to maintain flood insurance on all your 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 to not maintain flood isurance on a structure, and it floods, you are responsible for all flood losses relating to that structure.'

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#1974958 - 11/06/14 10:04 PM Re: Detached Structures do not require flood Insurance piggybanker
rlcarey Online
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NotDoneYet - That portion of the Dodd-Frank Act instructs the CFPB to add that statement to the Settlement Costs Booklet.

I'm not really sure what impact that has on the question?
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#1975024 - 11/07/14 02:30 PM Re: Detached Structures do not require flood Insurance piggybanker
NotDoneYet Offline
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It was in response to piggybanker's second question.

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#1975026 - 11/07/14 02:39 PM Re: Detached Structures do not require flood Insurance piggybanker
Kathleen O. Blanchard Offline

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Even though not yet in the booklet, it is not a bad reminder to customers when you allow them to drop coverage
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#1975343 - 11/07/14 09:10 PM Re: Detached Structures do not require flood Insurance piggybanker
John Burnett Offline
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Cape Cod
... IF you allow them to drop coverage. If the non-residential outbuildings on the lot with the residential structure are any significant part of the appraised value of the property securing the loan, you may not want to take advantage of this new wrinkle.
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#1975593 - 11/10/14 11:03 PM Re: Detached Structures do not require flood Insurance piggybanker
buggs Offline
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At this time, we are *not* requiring insurance on detached properties if the borrower comes back to us and claims we cannot under Biggert Waters due to "...flood insurance shall not be required..."

Yes. This has happened.

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#1975595 - 11/10/14 11:11 PM Re: Detached Structures do not require flood Insurance piggybanker
rlcarey Online
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rlcarey
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Galveston, TX
Well that is all fine and dandy and if the bank determines that safety and soundness dictates that the detached structures be covered, they can go down the road and find another lender.

The borrower does not get to ever make the rules regarding what the bank feels is necessary to secure their loan.
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#1975621 - 11/11/14 05:02 PM Re: Detached Structures do not require flood Insurance piggybanker
Dan Persfull Online
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Bloomington, IN
If you allowed the insurance to be waived based simply on that statement then someone in your organization has no idea what they are doing.

That statement only reference that the Act shall not require flood insurance on the property. It does not in any way preclude the FI from requiring flood insurance to protect their collateral.

It really helps if one read the section in its entirely and not just rely on snippets.

DETACHED STRUCTURES FROM MANDATORY
PURCHASE REQUIREMENT.
(a) EXCLUSION.—Subsection (c) of section 102 of the Flood Disaster
Protection Act of 1973 (42 U.S.C. 4012a(c)) is amended by
adding at the end the following new paragraph:
‘‘(3) DETACHED STRUCTURES.—Notwithstanding any other
provision of this section, flood insurance shall not be required,
in the case of any residential property, for any structure that
is a part of such property but is detached from the primary
residential structure of such property and does not serve as
a residence.’’.
(b) RESPA STATEMENT.—Section 5(b) of the Real Estate Settlement
Procedures Act of 1974 (12 U.S.C. 2604(b)) is amended—
(1) in paragraph (14), by inserting before the period at
the end the following: ‘‘, and the following 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 to not maintain flood
insurance on a structure, and it floods, you are responsible
for all flood losses relating to that structure.’ ’’; and
(2) by transferring and inserting paragraph (14), as so
amended, after paragraph (13).
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The opinions expressed are mine and they are not to be taken as legal advice.

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#1975645 - 11/12/14 03:02 AM Re: Detached Structures do not require flood Insurance piggybanker
David Dickinson Offline
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Central City, NE
So basically you're saying the borrower runs the bank. Sorry to be so blunt, but they are calling the shots buggs.
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