I have a flood situation that I am unsure of how or what to do. We closed a commercial loan in April 2013. The property (1-4 fam rental) was in a flood zone. The borrower obtained the insurance through his insurance agent. My Lender closed the loan but failed to see that the zone on the policy did not match our vender's SFHDF. The lender was notified to have the borrower pay the additional money to have the insurance cover the proper zone. After several months now. the borrower wants to know when we are going to force place the insurance on his loan. HUH! Apparently when the lender spoke with him (April) the borrower cancelled his policy because he thought we would get the proper coverage/zone through force placement. Can we force place this since this is a new loan. the zone was the only problem with the closing. the borrower didn't have the additional money to change the zone it would have been $1500 higher so he cancelled it. they mailed him a 45 day letter 9/17 even though they know he is not going to purchase it. He called today and said to go ahead and force place it he didn't want to wait the 45 day period out. Can I do this? I see a big fat cmp coming next year. Any response will be most appreciated.

You can FP, you just can't charge him until 45-days has lapsed. I'd also say you CAN FP, since the loan has already consummated, however you will have an uncorrectable violation by not making sure it was correct and adequate at closing.

So if he can't afford the $1500 how is he going to afford a force placed policy that will most likely be three times that amount. If you lent money to a borrower that is that close to the edge, you have to ask yourself where did your underwriting fail???? You might want to cut your losses and just declare the loan in default and foreclose now.

Probably would be good to set up escrow and increase the monthly payments. The borrower may be able to afford a monthly increase rather than the entire $1500. Is it possible to obtain flood insurance without paying a year in advance?

My understanding is Flood Insurance must be paid yearly.

Is it possible to obtain flood insurance without paying a year in advance?

Not if it is a NFIP policy. There might be private insurance available, but I have not seen too many casualty insurance policy that were not payable annually.