Compliance Alliance Question of the Week

Question:
We have a property that is partially in a flood zone. The house on the property is not in a flood zone, but the barn on the property is in a flood zone.  Do we have to require flood insurance for the barn?  This is an agricultural loan, but the barn is not used for agricultural production or as a residence.  The barn may be used to store a bush hog or a mower, but otherwise it is used primarily for household purposes.
 
Answer:
No--as long as the property is residential, then it doesn’t appear that you would need to require flood insurance as the barn looks to fall under the detached structure exemption to the purchase requirement. 
 
The flood insurance purchase requirement does not apply to the following…loan situations: Any structure that is a part of any residential property but is detached from the primary residential structure of such property and does not serve as a residence.  A structure that is part of a residential property is a structure used primarily for personal, family, or household purposes, and not used primarily for agricultural, commercial, industrial, or other business purposes. It is detached from the primary residential structure if it is not joined by any structural connection to that structure. Whether a structure serves as a residence is based on the institution’s good faith determination that the structure is intended for residential use or actually used as a residence, which generally includes sleeping, bathroom, or kitchen facilities, but not necessarily all three.
 
FDIC Flood Manual, "Exceptions to the Purchase Requirement" p. 6.3 https://www.fdic.gov/regulations/compliance/manual/5/v-6.1.pdf
 
Residential improved real estate means real estate upon which a home or other residential building is located or to be located.
12 CFR § 339.2 https://www.ecfr.gov/cgi-bin/retrieveECFR?gp=&SID=fdf70e757aacce7b4c813e5b2528621b&mc=true&n=pt12.5.339&r=PART&ty=HTML#se12.5.339_12