Flood Insurance - Uninsurable House

Answered by:

Question:

We recently conducted an audit of our flood records and found a file that has a standard flood report noting the property is in a flood area. The loan is a land loan, but has an old literally falling down house on it. The officer of record went to view the property, took pictures and wrote a memo stating that the house was above the elevation and not in a flood area. Could we send the required notice, consult an insurance agent and let them give us a letter that they would not insure it to place in the file? Would that work?

Answer:

Of course, all of this should have been done before the loan was closed. If it's truly insurable, you'll need documentation to support this. However, the flood rules indicate even low value buildings need to be insured. On page 29 of the FEMA Guidelines it states: If the land has a building on it, and the lender has a security interest in that building, the lender must require the purchase of flood insurance to protect its security interest.

First published on BankersOnline.com 6/23/08