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Multiple Buildings – Multiple Flood Zones

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Question: 
We have a commercial loan on farmland with 12 outbuildings and a dwelling. Only one of the buildings (a small barn) is located in a flood zone that requires insurance. The loan amount is $500,000 and the appraiser valued this building at $70,000. Because only a small percentage of the secured collateral is in a flood zone, is flood insurance still required?
Answer: 

Yes. Flood insurance is required only on the barn. You must provide the borrower/applicant with the Flood Notice and require flood insurance based on the lesser of the maximum coverage allowed under NFIP, the value of the property or the loan amount.

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Learn more about Michelle Strickland’s Flood Compliance for Commercial Lenders webinar.

First published on 02/18/2024

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