We’re having some debate about excluding detached structures from flood insurance. On page 47 of the manual it reads “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.” Does this mean if we have a loan that has a house that is the borrower’s residence (or a tenant house) and a barn that we can allow the borrow to choose whether or not to insure on the barn, but if we have a loan to a customer that is a farm loan that has a barn but no house that borrower would have to carry insurance on the barn?
Without regulations or regulatory guidance on this topic, I would agree with your interpretation at this point. We might get clarification on this when we have additional information. If a barn is part of residential property securing the loan and it isn’t used as a residence, it appears to be exempt from the requirement. This doesn’t seem to be the case for land only with a barn.
The regulators have said this provision was effective at enactment, but I believe some banks are waiting to utilize this exemption until there is additional guidance – as you know, we don’t have regulations or guidance to give us any additional details. Something to consider as well is the need to insure the structure for safety and soundness reasons.