I need a confirmation that we are reading the regulation correctly regarding flood insurance. The scenario is we have a loan on a property which is located in a flood prone area. The borrower has not provided the bank with a flood insurance policy so the bank forced placed flood insurance on the loan. Now,the loan has matured and the loan officer wants to renew the loan and allow the forced placed flood insurance to suffice without requiring the borrower to obtain a flood insurance policy of his own prior to the bank renewing the loan.
Jack, please advise if the bank has to require the borrower to obtain this flood insurance policy prior to us renewing the loan.
Any time you make, increase, renew or extend a loan secured by a building or mobile home located in a special flood hazard area you must require the borrower to purchase flood insurance. You cannot make the loan without appropriate flood insurance coverage.