force placed insurance

Lender notified borrower that before closing the loan they would have to have flood insurance in place. Borrower refuses to get flood insurance. Can the lender force place the flood insurance prior to the loan closing date so that he can proceed with the loan closing?

To my knowledge, you cannot force place a policy to make a loan. Force placing insurance only comes into play after the loan exists.

If the applicant refuses to obtain the mandated insurance, the LO must refuse to make the loan.

That's what I thought but can't seem to find anything in writing that specifically addresses this situation.

M Cockrell is absolutely correct. From the Mand. Purchase of Flood guidelines page 40:

The force placement of coverage is
designed for use at any time during the term
of a loan in uninsured and underinsured
situations; it is not intended for use at loan
origination. If a borrower refuses to obtain
flood insurance coverage as a condition of
obtaining a loan, the loan is deficient and is
not to be made.

Can the lender force place the flood insurance prior to the loan closing date so that he can proceed with the loan closing?


No.

d. Insurance Required at Loan Closing
A designated loan must have flood
insurance as a condition of closing. If a
borrower will not voluntarily obtain
coverage, the lender must deny the loan. A
lender cannot accept a borrower’s assurance
that he or she will obtain coverage in the
future or grant the lender indemnity while he
or she seeks coverage. Closing a designated
loan without coverage in place constitutes a
violation of the regulation.

By enacting this portion of the law,
Congress intended lenders to have clear
authority to force place; under certain
circumstances, they are obligated to force
place. The force placement of coverage is
designed for use at any time during the term
of a loan in uninsured and underinsured
situations; it is not intended for use at loan
origination. If a borrower refuses to obtain
flood insurance coverage as a condition of
obtaining a loan, the loan is deficient and is
not to be made.

I would question the sanity of any loan officer that wanted to proceed with a loan to such an uncooperative borrower. Especially on something that would put the loan in technical default on day one.