Flood - Manufactured Homes - 05/19/01 04:42 AM
This home is not "permanently" affixed, as a manufactured home placed on a true foundation. But in reality it is usually kept in that spot and is not a "recreational vehicle."
Thanks for your help!
Also, FYI, our examiners (OCC) have checked for flood determinations on mobile home loans in prior exams.
Building means a walled and roofed structure, other than a gas or liquid storage tank, that is principally above ground and affixed to a permanent site, and a walled and roofed structure while in the course of construction, alteration or repair
Mobile home means a structure, transportable in one or more sections, that is built on a permanent chassis and designed for use with or without a permanent foundation when attached to the required utilities. The term mobile home does not include a recreational vehicle. For purposes of (the Flood Disaster Protection Act) the term mobile home means a mobile home on a permanent foundation.
So, just what is a permanet foundation? I like Sheila's rule that if the MH is attached to utilities, water, sewage, etc., it probably is not going to move very quickly. You might note that a MH cannot be insured for flood unless the MH is tied down. Here is a quote from the FEMA Flood Insurance Manual:
A mobile home located in a SFHA must be anchored to a permanent foundation to resist flotation by providing over the top or frame ties to ground anchors
My discussions on this with the FDIC took me all the way to Ken Baebel in Washington, D.C. who said "Borrowers must provide tie downs if necessary to obtain flood insurance if a mobile home is located within a SFHA" (he told me I could quote him).
Imagine that you tell a borrower that their MH is located in a Zone A Flood Hazard Area. They go to the insurance agent who refuses them insurance because the MH is not tied down. They come back to you and say that they cannot get the insurance. If you let this go, I think you run a huge risk. Instead, you tell them that they can get insurance if they tie the MH down and that is just what they need to do.
Interestingly, most insurance providers (American Family, State Farm, etc.) will not issue hazard insurance on a MH unless it is tied down. Are you going to let them go without hazard insurance too?
Whew! That's all I've got to say about that! I hope this helps.
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Andy Zavoina
Opinions stated are not necessarily that of my employer.
To be insurable, a mobile home must:
1) Be affixed to a permanent foundation. A permanent foundation for a mobile home may be a poured slab or foundation walls, or may be piers or block supports, either of which support the mobile home so that no weight is supported by the wheels and axles of the unit.
2) Be anchored to the foundation to resist flotation, collapse or lateral movement by providing over-the-top or frame ties to ground anchors; or in accordance with manufacturer's specifications; or in compliance with the community's floodplain management requirements.
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Tom Easterday, CRCM
Opinions stated are my own and not necessarily those of my employer!
[This message has been edited by Tom Easterday (edited 05-18-2001).]
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Andy Zavoina
Opinions stated are not necessarily that of my employer.
Also, a MH sits on a piece of land, but only the land is collateral, is this still considered improved property for purposes of the determination requirements? Thank you.
[This message has been edited by Angela (edited 07-13-2001).]
If you only have bare land (as the MH is titled collateral) you do not have improved real estate. Therefore, the Flood rules do not apply.
Land is never insurable--improved (golf course, for example) or raw.
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Jim Bedsole, CRCM, CBA, CFSA
Opinions expressed are my own, and do not necessarily reflect those of my employer.
Please indulge me one more question,how does this apply to a builder developing a new subdivision? Would the lender wait until the actual construction of the homes begins to get the determination? Thank you for all your assistance.
[This message has been edited by Angela (edited 07-13-2001).]
Second question: This is a bigger question than you may realize. A SFHDF must be completed before the construction loan is closed (not when the improvements are made). If the new building will be in a flood zone, you must provide a notice to the borrower(s) wihtin a "reasonable period" of time before closing. The problem is purchasing the flood insurance on a building that doesn't exist yet.
Although, the National Flood Insurance Program (NFIP) permits policies to be purchased prior to the actual construciton of a building, many insurance agents don't like to sale the policy until the footers are in because they claim they must know the elevation of the footers before they can sale the insurance.
Here's a quote from the OCC's Handbook "Flood Disaster Protection" (CCE-FDPA, August 1996, page 5):
The NFIP covers improved real property or mobile homes located or to be located in an area identified by FEMA as having special flood hazards, including:
Loans for buildings under construction where a development loan is made to construct insurable improvements on the land. In this situation, flood insurance coverage should be purchased to keep pace with the new construction ... (emphasis added).
Flood insurance may be purchased within 90 days after construction has commenced, but before the bulding is walled and roofed.
Whew!! I hope that helps.
[This message has been edited by David Dickinson (edited 07-13-2001).]
"2. Are loans secured by raw land that will be developed into buildable lots subject to the Regulation?
Answer: No. Acquisition and development loans would not be subject to the Regulation beacuse they donot meet the definition of a "designated loan." However, when the final construction phase of an ADC (acquisition, development, construction) project is commenced, the Regulation becomes effective. This will require lenders to determine whether the property is located in an SFHA. If the building securing the loan is located or to be located in an SFHA, the other requirements of the Regulation will also apply. As noted above, the NFIP permits policies (subject to certain conditions and restrictions) to be purchased prior to the actual construction of a building."
So I may have answered by own question about the subdivision development. Once the final phase of this project begins, then the lender would need then need to get a determination on the individual lots. Would this be a good understanding? Thanks again!