When there is a mortgage on a non-residential condo unit and the property requires flood insurance which is provided by the condo association, what is the best practice for the mortgagee on the unit so as to be notified if a lapse in coverage occurs? Our borrower has the inside of the unit covered for flood, but the condo association is not otherwise providing us with information on the common areas its policy covers.
One of our commercial mortgage customers requires flood insurance. It expired and the bank followed the letter notification process. The customer was in the process of selling the property which was to close within the thirty day flood grace period. The deal fell through forty days after the flood insurance expired, so the customer obtained flood insurance on his own the day before the bank was required to force place the insurance. The agent provided the bank with an insurance flood binder showing the effective date as the day the customer paid the premium. As the customer obtained his own flood insurance, the bank did not force place insurance coverage. A few weeks after we received the binder, we received a copy of the flood policy DEC page showing that the company implemented a thirty day waiting period. I called the agent and the insurance company and was told that because the customer let the policy expire, they could put a thirty day waiting period on the insurance. If the insurance was required by the bank, why would they put a thirty day waiting period on the coverage? Is the bank out of compliance?
We have an affiliate that is an insurance agency. Although customers are given the choice to bring their own insurance policy, if they don't, we forceplace it with our affiliate. Even though we are not actually referring the customer, I am unsure if we should give the customer the Affiliated Business Arrangement Disclosure. My CO thinks that we don't have to, since there is no referral, but I have read a lot of conflicting articles on the matter. What is your opinion?