Answer:
Jim Bedsole
No threshold for building value that I'm aware of. I think you have to require $3,000 of flood insurance if your loan amount is more than $5,000.
Answer:
David Dickinson
Jim is right. One caution: Don't let the loan officer argue that the deductible could be $3,000 or more so flood insurance isn't necessary. You are required to have $3,000 in flood insurance coverage. You'll need to pick a deductible that is less than this amount so there is insurance coverage in place.
Answer:
Dan Perfull
To support Jim's and David's comments. From the FAQs.
17. Can a lender allow the borrower to use the maximum deductible to reduce the cost of flood insurance?
Answer: Yes. However, it is not a sound business practice for a lender to allow the borrower to use the maximum deductible amount in every situation. A lender should determine the reasonableness of the deductible on a case-by-case basis, taking into account the risk that such a deductible would pose to the borrower and lender. A lender may not allow the borrower to use a deductible amount equal to the insurable value of the property to avoid the mandatory purchase requirement for flood insurance.
Answer:
Jim Bedsole
You can structure your mortgage so that it excludes any building on the land, in which case flood insurance would no longer be mandatory. You will need to have your attorney structure specific language into the mortgage/deed of trust security document.
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