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#1499093 - 01/24/11 03:34 PM Force placing flood insurance on matured loan
shea930 Offline
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Joined: Dec 2008
Posts: 267
We have a loan with flood insurance that has matured. We are in the process of refinancing the loan but are having trouble getting sufficent flood insurance from the borrower. Basically we had a new appraisal done on the mobile home that is showing a higher RCV than on the previous loan where we used PVA card. This has been holding up the renewal process because our understanding of the flood rules is you cannot force-place insurance on a new loan??(Correct?) Another question is can we use the RCV provided by the insurance company if it is less than the appraisal, and still be compliant?

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Flood Compliance
#1499126 - 01/24/11 03:52 PM Re: Force placing flood insurance on matured loan shea930
starfish Offline
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starfish
Joined: Jun 2003
Posts: 416
Seattle
Does your new appraisal contain land as well as the mobile home? We do a number of mobile home loans, and typically the values of the mobile home decrease over time rather than increase. It's usually the land value that increases.

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#1499132 - 01/24/11 03:57 PM Re: Force placing flood insurance on matured loan shea930
Dan Persfull Offline
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Dan Persfull
Joined: Aug 2002
Posts: 47,016
Bloomington, IN
You are correct. If the borrower refuses to get adequate flood insurance you cannot force place insurance in order to close the refinancing.

You can work with the insurance company's RCV. See "Loss Payments" on page 28 of the Mandatory Purchase Guidelines.

However, be prepared to justify the difference between their value and the most recent value obtained from the new appraisal. If their (the insurance company) value is from 3 years ago I would be more inclined to go with the current appraisal and I would expect an examiner would be too.
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The opinions expressed are mine and they are not to be taken as legal advice.

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#1500942 - 01/26/11 11:02 PM Re: Force placing flood insurance on matured loan Dan Persfull
crlittle63 Offline
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Joined: Dec 2010
Posts: 10
Dan,

Can you tell me where exactly the Reg states you cannot force place insurance in order to close the refinancing of a loan??

we have a loan that we had to force place insurance. Now the loan has matured, but there are 8 months left of the force place premium. The customer wants to use that insurance rather than purchase his own. We have informed the loan officer we can't do this, but he wants to see where in the reg it states this. Your help will be greatly appreciated.

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#1500944 - 01/26/11 11:05 PM Re: Force placing flood insurance on matured loan crlittle63
rlcarey Offline
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rlcarey
Joined: Jul 2001
Posts: 80,325
Galveston, TX
Insurance is in place - I think what Dan said is you can't force place in order to close a loan. As long as the current insurance is adequate, I don't see a problem with proceeding.
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#1501089 - 01/27/11 02:55 PM Re: Force placing flood insurance on matured loan rlcarey
Dan Persfull Offline
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Dan Persfull
Joined: Aug 2002
Posts: 47,016
Bloomington, IN
Originally Posted By: rlcarey
Insurance is in place - I think what Dan said is you can't force place in order to close a loan. As long as the current insurance is adequate, I don't see a problem with proceeding.


Agreed. The original post does not mention a current forced place policy was in place. The use of an existing force placed policy is acceptable. However, the policy (new) cannot be force placed in order to close a loan.
_________________________
The opinions expressed are mine and they are not to be taken as legal advice.

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