We have a loan in which we hold the 2nd mortgage and the borrower let the initial flood insurance cancel. We are in the process of forceplacing and see that we need to notify the 1st mortgage holder and 1stmortgage insurance company of the situation. Do we have the right to contact them and inform them of this situation without running into trouble?

Yes. You can't get the insurance on your own. You must be added to their policy. Therefore, it's OK to contact the other institution.

The first mortgage holder did not require flood insurance and so when our bank originated the second mortgage (HELOC) and noticed that this insurance wasn't written the borrower purchased covereage for both the first and the second. The borrower states he is in the process of refinancing and attempted to get this done before the deadline of forceplacement and let the insurance lapse.

We are at the deadline and I am not sure in this instance if contact needs to occur between the first mortgagee, the 1st mortgagee insurer and the agent we are working with to write the force placed insurance policy.

Does it appear that we are OK to force-place to cover our interest along with the 1st mortgage balance? The customer has room on their lien of credit and this is how we would receive payment for the policy.

Yes. However, the first lien holder should be force placing. I believe it is OK to contact them and discuss this.