One of our lenders has a TRID loan on a primary dwelling in process, not a purchase but it will have rescissions, usually we require proof of payment of flood insurance prior to printing closing docs. The lender wants to know if the flood insurance can be paid out of the loan proceeds at closing. Is this something we can do?

It's not advisable. If the agent does not present the premium within the allotted time you would have a 30 day waiting period before the insurance is in place therefore you would have a violation for closing the loan without flood insurance.

Prvious Thread 1

Previous Thread 2

I'm very much in the camp that the insurance must be paid for PRIOR to closing. I believe it goes beyond the risk that Dan presents. The regulation states:
A bank shall not make, increase, extend, or renew any designated loan unless the building or mobile home and any personal property securing the loan is covered by flood insurance for the term of the loan. [§339.3(a)]

The old Guidelines stated:
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. [MPFIG – page 5]

If you close, advance the loan and then purchase insurance, how was the building "covered" (past tense). The Guidelines also use the terms "as a condition" - again, past tense.

Other than construction loans, there are no FAQs, regs, etc. that state anything about delaying the purchase.

Thank you, gentlemen. I will most certainly be in the 10K Club before my one year anniversary as Compliance Officer. I say this while weeping.