Q: An organization owns the land on which a building (owned by another organization) sits. The property is located in a V zone. Both organizations have common ownership. The organization that owns the building pays lot rent to the organization that owns the land.
If we issue a loan to the organization that owns the land, securing only the land, is the customer exempt from flood insurance because the building is owned by a separate organization?
A: The loan described in this scenario does not meet the definition of a designated loan because it is not secured by a building or manufactured home. The borrower is not required to obtain flood insurance under these circumstances.
– This Q&A was included in the materials from the FDIC New York Region Regulatory Teleconference: “Flood Insurance – Flood Insurance Compliance and an Examiner’s Perspective” which took place on December 3, 2012. These materials may be found here: https://www.fdic.gov/news/conferences/NY/2012-12-03.html