2nd Lien and Flood Insurance

If we have a second lien on a property that is in a flood zone, are we only responsible for considering the loan amount of the second lien when determining how much flood insurance we need?

Lesser of:
Maximum amt allowed under NFIP
Replacement cost
Balance of 2nd lien loan

No, you must also consider the first lien in the 'total'.

And, you are totally responsible for insuring you are both covered...or at least they are if you run out of max coverage!

What if my bank has the 1st and I am aware of another bank that has a 2nd? Am I responsible for enough ins to cover both of us or does the bank with the second have this responsibility?

For example, my loan is only $50,000 on a $300,000 home, other bank has a loan for $20,000. Do I require $50,000 or $70,000?

1st mortgagee only has to include their lien amount in the calculation / junior mortgagee includes their lien amount + all senior ones. In your example you would need 50 / 2nd would need 70.

Thanks for the quick response, which of course leads to another question.

Response above appears that homeowner would have to provide a policy for $50 and another for $70. Wouldn't they actually have a policy for $50 with both banks as mortgagees and another policy for $20 with only the 2nd bank as mortgagee? Total debt on the home is $70.

I thought you could only have one policy on a property at one time.

NFIP will only recognize one policy....so if the borrower has an NFIP policy that only covers the 50m first mortgage, the second mortgagee will have to get the borrower to increase the policy up to 70m and list both mortgagees.

If the 2nd mortgagee forces with private insurance, there is a possibility they could force their own policy for the additional 20m, PROVIDED that they have a concurrent coverage endorsement on their policy. Even in that situation, the policies will work like health insurance coordination of benefits, so the payout of the 2 policies together may still not equalt o the total outstanding liens.

Thanks Dani, that clears up all the technical/operational questions.