[aschliebe]

Good Morning,

The affordability act and the new rules that you don’t have to insure subsequent non residential buildings only applies to scenarios where there is a residence AND additional structures correct? This would not apply to a commercial transaction where there are no residences right? We have a commercial loan that has multiple commercial structures on a lake.

Topic

[aschliebe]

Homeowner’s Flood Insurance Affordability Act:
EXCLUSION OF DETACHED STRUCTURES FROM MANDATORY PURCHASE REQUIREMENT.
(a) EXCLUSION.—Subsection (c) of section 102 of the Flood Disaster Protection Act of 1973 (42 U.S.C. 4012a(c)) is amended by adding at the end the following new paragraph:
“(3) DETACHED STRUCTURES.—Notwithstanding any other provision of this section, flood insurance shall not be required, in the case of any residential property, for any structure that is a part of such property but is detached from the primary residential structure of such property and does not serve as a residence.”.

I thought I would upload the above. I’m standing by residential only.

[rcooper]

I agree – this exclusion only applies to loans secured by residential property.

[Mary Jane Pool]

Would the exception include a Multi-family structure that has a separate building for a Laundry room?

[rcooper]

Per 12 CFR 339.4 (FDIC) the flood regulations state that flood insurance isn’t required on:
Any structure that is a part of any residential property but is detached from the primary residential structure of such property and does not serve as a residence. For purposes of this paragraph (c): (1) ‘‘A structure that is a part of a residential property’’ is a structure used primarily for personal, family, or household purposes, and not used primarily for agricultural, commercial, industrial, or other business purposes;

and

From page 25 of the final flood rules (https://www.fdic.gov/news/board/2015/2015-06-16_notice_sum_c_fr.pdf):
“The Agencies believe detached structures used for commercial, agricultural, or other business purposes should be protected adequately by flood insurance as collateral given their value to the borrower and lender, and should not be covered by the detached structures exemption.”

I am assuming this is a laundry facility that charges residents. If so, then I would consider it a building that is for commercial use. As a result, it would not qualify for the detached structure exemption.

[Author]

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