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We have an application to expand an existing mobile home park. The applicant leases pads to other persons that own the mobile home structures that are then affixed to the property. (HMDA Dwelling, but discomfort is with NFIP)
A small part of the proposed park is in a Flood Hazard Area, but there are no current structures in the part of the park that is in the hazard area. however, the plan includes building pads within the hazard area so it can be reasonably assumed that during the life of the loan structures may be affixed there.
Is it reasonable to proceed with no flood insurance since no structures are there now, and if/when structures are affixed they would still not be part of the Banks collateral since they are not even owned by the borrower?
From a ~UDAP risk perspective, the lease for the pads does require elevation and advises lease-holder to get insurance.The flood regulations apply when a loan is secured by a building or a mobile home. As mentioned your loan is not secured by either. There does not appear to be any flood insurance concerns and you have the UDAAP concerns covered.
The operator may have UDAAP concerns if pads in the flood zone are leased without notice of the risk.
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