Flood insurance conundrum: Residential condo in a commercial building

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Question:

We are taking as collateral a residential condo that is located on the second floor of a commercial building. The building is mixed use, mainly for retain and office space, but does include some residential condos. The building is in a flood zone. Please help me understand how to get flood insurance for the unit. There is no Residential Condominium Building Association Policy (RCBAP).

Answer:

You do not need to require any flood insurance on it at all! The new 2022 Interagency Flood Q&As clarify that such a loan is not a “designated loan” and therefore is not subject to mandatory flood insurance whatsoever.
CONDO AND CO-OP 9. What are the flood insurance requirements for a residential condominium unit or a non-residential condominium unit located in a non-residential condominium building? What are the flood insurance requirements for a non-residential condominium unit located in a residential condominium building?

ANSWER: Coverage is not available under the NFIP for an individual residential condominium unit or a non-residential condominium unit located in a non-residential condominium building. NFIP coverage is also not available for a non-residential condominium unit located in a residential condominium building. Therefore, a loan secured by one of these types of units is not a designated loan under the Regulation, and the mandatory flood insurance requirement does not apply. The Agencies note, however, that contents coverage is available through the NFIP for these types of units. See NFIP Flood Insurance Manual.