Borrower requested a loan to purchase a commercial property that contained a 1 unit apartment above the building. The majority (90%) of the commercial property would be used for retail business. The Borrower was provided the notice that the loan request required flood insurance and all the proper notices and the correct amount of the insurance required was delivered timely. The initial dec page the agent provided to us showed that the application was for commercial RE and the Amount requested adequate to cover the principal amount of the loan. The quoted amount was paid by the borrower prior to closing.
We received a copy of a letter the agency sent to the borrower and the final insurance coverage document today. The insurance agent's letter to the borrower states that the insurance premium (that he quoted and had the customer pay for) was incorrect and was written for a residential property not a commercial. The amount the borrower paid was inadequate for the amount of coverage requested. The policy was written for a coverage amount about $60,000 less than he asked for. the Agent gave the borrower 10 days to increase the coverage amount with an additional $2,000 owed. The agent made the error and his underwriters are the ones that discovered the error. We had no way to know until today that the coverage amount was quoted incorrectly and the policy resulted in being written as residential. the Dec page was correct and the final policy was not. We have called and left a message with the borrower, but have not heard from him yet today.
We reached out to the insurance agent to discuss this issue. The Agent doesn't seem to think he is at fault.

If the borrower does not increase the policy amount to adequately cover our principal balance. Do we force place the difference if he does not respond to our 45 day letter. I was searching for, but could not locate ---that a property can only have one flood policy at a time under NFIP. Am I correct. I would also like to complain or turn him in to someone. don't know how or where to do that. any suggestions.

From what you are describing the entire building is eligible for one $500,000 policy. The individual could not buy this policy, it would have to be the building owner's association. The agent knows not what he is doing and this should have been recognized by the bank and this loan never should have been allowed to happen until adequate insurance was in hand,

Actually it is a small commercial property loan. It used to be a pizza restaurant and was purchased by an individual.. Our loan is under 100K. The insurance documentation initially provided to us was adequate. It was only today when we received the actual policy that was different. We had no way of knowing that it had changed from what was originally sent to us.

Sorry - I misunderstood. So the agent under estimated the annual premiums for a policy of less than $100,000 by more $2,000? That hardly seems possible. Force placement will be required or you will have to call the loan if you force place NFIP policies.

Thank you rlcarey. I happen to know that we have had similar issues with this particular Agent. We don't feel as though we can steer our customers away from using this guy. We would however, like to file a complaint on him but not sure how to go about doing this. Any thoughts?

Your State Department of Insurance would be the place to start since insurance is a State Law issue.