Loan in question is secured by two properties, a house in a SFHA and farm land that is not in a flood zone and does not have any structures on it at all. The total principal balance on the loan is approximately $130,000. The PVA assessed value of the house is $72,000 and the value of the land is $100,000. The Borrower’s current hazard insurance policy lists the replacement value of the house as $91,000. Currently we have a force-placed policy on the property in the flood zone for the full principal balance of the loan.
Can we lower the coverage amount on our force placed policy to cover only the replacement value on the house instead of the entire principal balance?