Flood Coverage Amount

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• January 31, 2019 at 4:08 pm EST #14427
  kmeade

  Participant

  If a piece of property is in a flood zone, using the scenario below, what do you use to calculate the flood coverage needed, the mortgage amount or the principal loan balance? Since the rule says “principal loan amount” but that is not the amount of the lien on the property what do you use?

  Max available under NFIP = $500,000
  Insurable Value (RCV) = $250,000
  Outstanding Principal balance = $500,000

  Mortgage amount on the real estate = $130,000

  February 4, 2019 at 1:59 pm EST #14451
  rcooper

  Member

  Is this an open-end line of credit? If so, the outstanding balance could increase at any time and, as a result, you would need to use the maximum line amounts in the calculation for coverage. If it is not an open-end line and you increase the loan amount this would be a MIRE event.

  Let me know if I’ve misunderstood.

  February 5, 2019 at 11:00 am EST #14454
  rcooper

  Member

  To further clarify:
  The mortgage amount will not matter. You will still use the same criteria meaning, the amount of insurance must be at least equal to the lesser of:
  • The outstanding principal balance of the designated loan; • The maximum limit of coverage available for the particular type of property under the Act; • The value of the improvements (building or mobile home) and any personal property that secures a loan and not the land itself. [Insurable Value or Replacement Cost Value]

  I agree that for a residential condo unit the max would be $250,000 coverage. What was the reason for determining $500,000 was the max available for the condo – is it a non-residential unit?

  This might be helpful:
  https://www.fema.gov/media-library-data/1523307300588-4cf9726b2eb04c3471a3e9d37a58fa6a/06_condo_508_apr2018.pdf

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