Well, you cannot "make a covered loan without evidence of adequate flood coverage in place at closing" and you cannot force-place flood coverage when making a new loan that does not have it already in place or in the correct amount.
It seems that you have already approved the loan, contingent on the applicant/borrower coming to closing with proper flood insurance coverage.
The old "Mandatory Purchase of Flood Insurance Guidelines" that is now defunct stated "A designated loan must have flood insurance as a condition of closing. If a borrower will not voluntarily obtain coverage, a 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."
So your hands are tied and, in may opinion, you must now deny the loan and use "Other" with an explanation of the facts as your reason.