I searched for this topic and couldn't find any previous discussions, so here goes.

We have a flood policy declaration for a loan in a SFHA but the declaration does not have us (or anybody) listed as the mortgagee. I'm sure this is required, but the insurance agent is saying that he is not able to add our bank as the mortgagee. Aside from the question as to why he cannot add us, is this something that would have to be force-placed if the agent will not cooperate? Has anyone ever heard of an agent doing this?

"but the insurance agent is saying that he is not able to add our bank as the mortgagee."

What reason does he give??? Never heard of this before.

If it's a RCBAP the mortgagee cannot be added (page 45 of the MPFIG), however for other dwelling or general policies there is no such prohibition that I'm aware of.

Dan, you remind me of a twist to this one.

It's not a residential condo but rather a non-res building. It is a retail store that is part of a chain and our borrower owns the land and building. Does this make a difference?

A non-residential building would be insured under a general policy form. To the best of my knowledge there is no prohibition in adding the mortgagee.

I would ask this agent to give you chapter and verse why they cannot add you as the mortgagee.

Thanks Dan!

Randy pointed something out to me in a PM. If this is a leasehold improvement then your only security would be the land. If that is the case then you would not be listed as mortgagee because you would not have a security interest in the building.

We very very rarely deal with leasehold improvements so that scenario never entered my mind. Thanks Randy.

I'm pretty sure our borrower owns the land and building and is leasing it to the retailer, but I will definitely double-check that scenario.

Can I dredge this topic up again? I'm kinda green regarding leasehold improvements.

Our customer does not own the land, but rather leases it AND the building situated on the land. We have a lien on "leasehold improvements" which essentially only covers and expensive sign that the customer placed on top of the existing building. The building is in a flood zone. The loan is an SBA loan and so the SBA requires flood insurance on the contents upon which we hold a lien. What are the requirements on the Bank for "leasehold improvements" with respect to flood?

Well, if the lease hold improvements are not the building, there would be no requirement on the bank to perform a FHD from a regulatory standpoint as you do not have an interest in improved real property or the structure. From and safety and soundness factor, if without the leased facility, the business could not be a going concern (i.e. specialized building, operations not relocatable, etc.) then flood insurance might be wise. However, the owner of the building would have to get the policy and not the borrower. SBA requirements are totally a different matter.

Thanx, Randy. That makes perfect sense!