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#1774472 - 01/09/13 09:49 PM force placed insurance
ledfoot Offline
Member
Joined: May 2004
Posts: 93
Georgia
Lender notified borrower that before closing the loan they would have to have flood insurance in place. Borrower refuses to get flood insurance. Can the lender force place the flood insurance prior to the loan closing date so that he can proceed with the loan closing?
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Flood Compliance
#1774475 - 01/09/13 09:54 PM Re: force placed insurance ledfoot
M Cockrell Offline
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M Cockrell
Joined: Jan 2003
Posts: 1,033
Dallas, TX
To my knowledge, you cannot force place a policy to make a loan. Force placing insurance only comes into play after the loan exists.

If the applicant refuses to obtain the mandated insurance, the LO must refuse to make the loan.
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#1774478 - 01/09/13 10:00 PM Re: force placed insurance ledfoot
ledfoot Offline
Member
Joined: May 2004
Posts: 93
Georgia
That's what I thought but can't seem to find anything in writing that specifically addresses this situation.
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#1774483 - 01/09/13 10:01 PM Re: force placed insurance ledfoot
Irishguy Offline
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Irishguy
Joined: Aug 2008
Posts: 586
Kentucky
M Cockrell is absolutely correct. From the Mand. Purchase of Flood guidelines page 40:

The force placement of coverage is
designed for use at any time during the term
of a loan in uninsured and underinsured
situations; it is not intended for use at loan
origination. If a borrower refuses to obtain
flood insurance coverage as a condition of
obtaining a loan, the loan is deficient and is
not to be made.

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#1774485 - 01/09/13 10:03 PM Re: force placed insurance ledfoot
Dan Persfull Offline
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Dan Persfull
Joined: Aug 2002
Posts: 46,832
Bloomington, IN
Can the lender force place the flood insurance prior to the loan closing date so that he can proceed with the loan closing?


No.

d. Insurance Required at Loan Closing
A designated loan must have flood
insurance as a condition of closing. If a
borrower will not voluntarily obtain
coverage, the lender must deny the loan. A
lender cannot accept a borrower’s assurance
that he or she will obtain coverage in the
future or grant the lender indemnity while he
or she seeks coverage. Closing a designated
loan without coverage in place constitutes a
violation of the regulation.

By enacting this portion of the law,
Congress intended lenders to have clear
authority to force place; under certain
circumstances, they are obligated to force
place. The force placement of coverage is
designed for use at any time during the term
of a loan in uninsured and underinsured
situations; it is not intended for use at loan
origination. If a borrower refuses to obtain
flood insurance coverage as a condition of
obtaining a loan, the loan is deficient and is
not to be made.
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The opinions expressed are mine and they are not to be taken as legal advice.

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#1774491 - 01/09/13 10:10 PM Re: force placed insurance ledfoot
rlcarey Offline
10K Club
rlcarey
Joined: Jul 2001
Posts: 79,617
Galveston, TX
Originally Posted By: ledfoot
Can the lender force place the flood insurance prior to the loan closing date so that he can proceed with the loan closing?


I would question the sanity of any loan officer that wanted to proceed with a loan to such an uncooperative borrower. Especially on something that would put the loan in technical default on day one.
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