This clip is from Memory Lane during the July 2020 Monthly Connection. Take a look at this peer group! https://store.bankerscompliance.com/link/MConnection
Head on into section five. Jarod and I talked through this this morning. It took much longer than I thought it was going to, but this is from those new Q&As, but it’s nothing new. It’s an area to me that often gets misunderstood. Notice that we say the notice, that’s the section in the new proposals. It has to do with giving the notice. It’s question number two and it’s talking about mobile homes. What I want to do is have you all read through this and I’m going to break this down into really four different components here.
The question is about, we don’t know where they’re going to put their mobile home. What do we do? And so starting out there, first off, let me do this. I need to define what a mobile home is. A mobile home, as they explain in here is something that’s built on a chassis, et cetera. Flood insurance comes into play when the mobile home is put on a permanent foundation. Now what does that mean? I have a memo that I will put up here in the chat room in just a minute, or Amy actually, if you could help me, it’s a nope, I’ve got it right here so I can grab it.
This is back in 2000. I actually emailed what was FEMA had kind of a helpline and they basically explain, let me see if I can just attach this here. There. Must a mobile home be tied down? Was kind of the question. What is a permanent foundation? Because the definition of mobile home means that it’s off of its tires. It’s not on its case anymore. Now I’m going to use this wording. If it’s a mobile home that can roll down the road on tires, I’m going to call that an RV. And I know there’s a big difference here. I’m talking about let’s just say a mobile home that qualifies for flood insurance means that it’s off of the tires. It’s supported on some type of foundation. It’s most likely going to be hooked up to utilities and stuff like that. And that’s what this memo that I just put up there talks about.
But let’s talk about a mobile home that isn’t yet. And that’s where this question starts out. We don’t know where this thing’s going to be. Their answer goes into, you must provide the notice of special flood hazard within a reasonable period of time, prior to completion of transaction. There’s a footnote 46 about that. If the lender determines that the mobile home’s carrying the loan will be located a special flood hazard just prior to closing. Hey, Jarod’s buying a mobile home and we gave him a loan to buy one, but we don’t know where he’s going to put it. And then right before closing, he says, “Aha, this is where I’m going to put it.” Now and that’s probably pretty rare.
Well, what they’re saying is in that case, then you need to check where’s that property at? Do your flood determination. If it comes back, that it’s in a special flood hazard area, you may or may not have to do flood requirements. Why? Because is it going to be on a permanent foundation? And that’s of the second part that I’ll get to in just a minute. Now so what they’re saying is, if you realize that it is going to be a special flood hazard area and if it’s going to be on a permanent foundation, I’ve got to give them the notice and I might need to delay the closing to give him the notice, a reasonable period of time so he can go out and buy this insurance. I’m going to draw a line. That’s kind of one, let’s go to the next one.
It says in the case of a loan transaction secured by a mobile home not located on a permanent foundation. In other words, it’s still got its tires. That that home only transactions are excluded from the definition of mobile home. I use the word RV or camper or whatever. If it’s still on his tires, then it doesn’t qualify. And the note’s requirements would not apply. However, the agencies encourage you to still advise the borrower that the mobile home is later located in a permanent foundation that they wouldn’t need to have it. Let’s call that number two.
Now let’s go to the last part. If the lender, when notified of the location of the property of the mobile home, subsequent to loan closing. We’ve closed your loan and then we find out that you’ve put it on a permanent foundation and it’s located in a special flood hazard area, then I’m going to have to require flood insurance. And forced placement must be given. If the borrower fails to buy it, then I’ll buy it for them.