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Flood Insurance Coverage on Construction Loans
Dan Persfull, BOL Guru
Guru Bios
Question: During a construction loan at what point is flood insurance coverage required? It is my understanding that flood is required as soon as three walls and the roof are up.
Answer: Technically the flood insurance should be in place before the loan closes with an effective date for when the materials are first delivered. See pages 25 & 26 of the Mandatory Purchase of Flood Insurance Guidelines. Some regulators are taking a more lenient approach, therefore you should discuss this issue with your regulator. By the way, there is no reference to 3 walls and roof. A building/structure is any walled (2) and roofed structure. Click on this link and look at the definition of a building.
First published on BankersOnline.com 6/05/06
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