Skip to content
BOL Conferences Top Gun 23
Learn More - Click Here!

New Reply Thread Options
#2157852 - 12/20/17 01:59 PM Flood insurance on C/P loan
MCCompliance Offline
Member
Joined: Nov 2012
Posts: 95
Borrower applies for construction-perm loan and loan is originated. Property on which the home will be located is in a flood zone. Bank does not require flood insurance upfront, it would be provided when slab is poured.

Little bit later borrower comes in for loan proceeds. Bank finds out that borrower has used their own funds to start building and house is partially complete. Bank does not have proof of flood insurance. Borrower has some of their own additional funds in an LIP account and wants to draw from that instead of loan proceeds.

Bank still must require flood insurance at this point first - before allowing any draws - because slab has been poured, correct?
_________________________
My views only.

Return to Top Reply Quote Quick Reply Quick Quote
#2157859 - 12/20/17 02:15 PM Re: Flood insurance on C/P loan MCCompliance
David Dickinson Offline
10K Club
David Dickinson
Joined: Nov 2000
Posts: 18,762
Central City, NE
Correct. Once the slab is poured, you can't advance any money until adequate flood insurance is in place. Refer to FAQ #22:

…a lender may allow a borrower to defer the purchase of flood insurance until either a foundation slab has been poured and/or an elevation certificate has been issued, or if the building to be constructed will have its lowest floor below the Base Flood Elevation, when the building is walled and roofed.

the lender must require the borrower to have flood insurance in place before the lender disburses funds to pay for building construction (except as necessary to pour the slab or perform preliminary site work, such as laying utilities, clearing brush, or the purchase and/or delivery of building materials).

…must have adequate internal controls in place at origination to ensure that the borrower obtains flood insurance no later than when the foundation slab has been poured and/or an elevation certificate has been issued.


If the borrower hasn't already applied for the insurance policy, there will be a 30 day waiting period before the flood insurance is effective.
_________________________
David Dickinson
http://www.bankerscompliance.com

Return to Top Reply Quote Quick Reply Quick Quote
Quick Reply:
HTML is disabled
UBBCode is enabled




Moderator:  MagicCity, P*Q, Truffle Royale