Is the only option to look at RCV of the whole thing versus flood insurance amount to satisfy our flood compliance requirement?

I think we may have a complex that is under-insured due to a change in the condo association's policy this year. Our borrower owns one condo in this complex. We've addressed the safety and soundness concern with lending, but LO still wants the mtg on everything our borrower has, including the condo in the high risk zone. LO has now discussed with borrower as I don't know if the association realizes they are under-insured. I'm betting they lowered coverage thinking they just had to get water out of the lobby, not make structural repairs to a high-rise.

Trouble is what to do with the under-insurance and the maturity date of the loan. Our flood compliance dept seems to be OK with the loan as it sits now, under-insured and matured, but won't allow the renewal or an extension. Are there any other options short of releasing the mtg? Private policy for the loan amount? I can't believe I am just trying to check a box and move forward.

Okay, here's the deal in a nutshell.

CONDO's ought to be insured for the full RCV..OR, $250,000/unit.

If not and if they are underinsured by <80% of the full RCV at time of loss, there will be an additional co-insurance penalty that even additional insurance will not cover. This is a HUGE S&S issue...[do the math!]

If they are somewhere between 80 - 100%,then I would require a general borrower-aquired policy for the difference. Again, considering the $250k/unit limit.

I hope this helps you.

Release the mortgage or insure adequately...those are your options.

(*@^$%@%_Q+

And it does help! Immensely. Much better than ...can't have docs.

Aren't we in the same boat with the loan on our books right now? And, math done...there's trouble in river city.

Yes. However, the loan is matured...so you call the loan under both defaults and they comply or you take the collateral. I don't see any reason why you couldn't also start FP procedures...but it is an unusual situation with it being matured.

it gets better!