Multiple loans - multiple buildings

Posted By: Tryin-2-Comply

Multiple loans - multiple buildings - 12/05/12 05:38 PM

Here is our situation: We have one loan secured by real estate and 4 structures in a SFHA. Then, we have an equipment loan.

Loan # 1. Property loan with 4 structures: Balance $58,560.45. (value of structures is $147,836).
Loan # 2. Loan secured by equipment that could be stored in some of the structures on loan #1: $39,518.79 (equipment valued at $50,000 - however, it is believed that some of the equipment is too large to be stored in any of the structures).

The loans are not cross-collateralized as loan #1 is their primary residence.

We are in the middle of determining the amount of insurance required for force placement. The customer refuses to purchase flood insurance.

Would we force place flood insurance on the equipment, although we are unsure if and when the equipment may be stored in the buildings - does it matter since the equipment is NOT collateral on loan no. 1?

BTW - the customer is uncoorperative.

Posted By: rlcarey

Re: Multiple loans - multiple buildings - 12/05/12 05:48 PM

First, how can four buildings be their primary residence?

Second, if the same loan is not secured by the building and contents, then the flood insurance requirements do not apply.

Third, depending on the type of "equipment" you are referring too, it might not qualify for content insurance anyway.
Posted By: Tryin-2-Comply

Re: Multiple loans - multiple buildings - 12/05/12 07:08 PM

The first loan is their home and 3 buildings. A barn, a shed and a mobile home.

The second loan is not secured by the home and buildings. Only the equipment. And the equipment is not collateral on the home loan.

Third, the collateral is a tractor, seeder, spreader, disc, planter, gravity wagon, grain buggies, sprayers, bushhog, feeders, cultivator, water tanks, haymower, etc.
Posted By: Dan Persfull

Re: Multiple loans - multiple buildings - 12/05/12 09:44 PM

#1. You need all 4 buildings insured for a total of $58,560. How you allocate the coverage among the buildings is up to you.

2. Flood insurance on content is only required when the loan is secured by both the building and contents.

For this small of a loan I would consider declaring the loan in default, failure to provide adequate insurance under the loan and security agreement, and call the loan. You've probably already have eaten up 3 or 4 month's profit with the time you have invested in getting the insurance force placed.