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#1966550 - 10/02/14 05:27 PM
Detached Structures do not require flood Insurance
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Member
Joined: Dec 2005
Posts: 63
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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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#1966573 - 10/02/14 06:06 PM
Re: Detached Structures do not require flood Insurance
piggybanker
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10K Club
Joined: Jul 2001
Posts: 83,227
Galveston, TX
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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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The opinions expressed here should not be construed to be those of my employer: PPDocs.com
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#1966589 - 10/02/14 06:23 PM
Re: Detached Structures do not require flood Insurance
piggybanker
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Joined: Dec 2005
Posts: 63
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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
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10K Club
Joined: Jul 2001
Posts: 83,227
Galveston, TX
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No. Not by regulation.
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The opinions expressed here should not be construed to be those of my employer: PPDocs.com
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#1971998 - 10/24/14 08:49 PM
Re: Detached Structures do not require flood Insurance
piggybanker
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Member
Joined: Aug 2012
Posts: 88
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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
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10K Club
Joined: Oct 2000
Posts: 40,086
Cape Cod
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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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John S. Burnett BankersOnline.com Fighting for Compliance since 1976 Bankers' Threads User #8
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#1972011 - 10/24/14 09:21 PM
Re: Detached Structures do not require flood Insurance
John Burnett
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Posts: 88
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#1972750 - 10/29/14 05:27 PM
Re: Detached Structures do not require flood Insurance
sbrelje
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Member
Joined: Aug 2012
Posts: 88
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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
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100 Club
Joined: Jan 2012
Posts: 163
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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
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Member
Joined: Aug 2012
Posts: 88
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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
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Diamond Poster
Joined: May 2011
Posts: 1,984
Idaho
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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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#1973548 - 10/31/14 08:47 PM
Re: Detached Structures do not require flood Insurance
piggybanker
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Member
Joined: Aug 2012
Posts: 88
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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
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100 Club
Joined: Sep 2005
Posts: 159
Midwest
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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
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Junior Member
Joined: Oct 2014
Posts: 31
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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
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10K Club
Joined: Aug 2002
Posts: 47,517
Bloomington, IN
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Yes. See post #1972750 on page 1 of this thread.
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The opinions expressed are mine and they are not to be taken as legal advice.
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#1974958 - 11/06/14 10:04 PM
Re: Detached Structures do not require flood Insurance
piggybanker
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10K Club
Joined: Jul 2001
Posts: 83,227
Galveston, TX
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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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The opinions expressed here should not be construed to be those of my employer: PPDocs.com
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#1975343 - 11/07/14 09:10 PM
Re: Detached Structures do not require flood Insurance
piggybanker
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10K Club
Joined: Oct 2000
Posts: 40,086
Cape Cod
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... 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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John S. Burnett BankersOnline.com Fighting for Compliance since 1976 Bankers' Threads User #8
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#1975593 - 11/10/14 11:03 PM
Re: Detached Structures do not require flood Insurance
piggybanker
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Power Poster
Joined: May 2005
Posts: 8,487
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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
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10K Club
Joined: Jul 2001
Posts: 83,227
Galveston, TX
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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.
_________________________
The opinions expressed here should not be construed to be those of my employer: PPDocs.com
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#1975621 - 11/11/14 05:02 PM
Re: Detached Structures do not require flood Insurance
piggybanker
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10K Club
Joined: Aug 2002
Posts: 47,517
Bloomington, IN
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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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