Our borrower currently has a loan that is on forced placed flood insurance. They are now doing a new loan with this property as collateral and needs more coverage. Borrower will need to obtain full coverage needed prior to loan closing, since this is on forced placed they will need to purchase full amount required on their own correct? They cannot just obtain the difference and leave the other on forced placed right?

You are correct. And why would you even contemplate making another loan to a borrower that is currently in default on the loan they already have with the bank? Do you normally make additional loans to borrowers already in default?