[Sandy]

We closed a loan on a property that the borrower constructed a home last year. Already on that property was an older garage that the borrower made livable for his family while the house was being built. The house is not in a flood zone but the garage is. The house is complete and loan was just refinanced to set up on long term financing. The borrower has said the living quarters was removed from the garage and wants to cancel the flood insurance. In order to not require it does the sleeping, kitchen AND BATHROOM need to be removed? Some garages do have bathrooms but are not residences. We were going to send the appraiser out to do a completion certificate and take pictures of the garage to confirm what the inside looks like before we told the borrower we would not require flood insurance anymore.

[jholzknecht]

A detached structure MAY be excluded from the flood insurance requirement if the conditions are met. One of the conditions is that the lender must determine if the structure is intended for use or actually used as a residence, which includes sleeping, bathroom OR kitchen facilities. The fact that the garage includes a bathroom confuses the matter. The safe practice is to require flood insurance on the garage.

[jholzknecht]

A detached structure MAY be excluded from the flood insurance requirement if the conditions are met. One of the conditions is that the lender must determine if the structure is intended for use or actually used as a residence, which includes sleeping, bathroom OR kitchen facilities. The fact that the garage includes a bathroom confuses the matter. The safe practice is to require flood insurance on the garage.

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