Maximum Deductible

Posted By: Joanna

Maximum Deductible - 08/13/15 01:07 PM

Is there a maximum deductible on a residential 1-4 mortgage? Or is it a safety and soundness issue for the bank to decide if the borrower can pay the higher deductible?
Posted By: LillyNY

Re: Maximum Deductible - 08/14/15 07:49 PM

I would say both. The maximum deductible on a residential flood insurance policy is $10,000 but for safety and soundness reasons, my bank allows just the lesser of 5% of the face amount of the policy or $5,000.
Posted By: David Dickinson

Re: Maximum Deductible - 08/15/15 12:12 AM

There is a maximum deductible on NFIP policies. It's up to the bank (not the borrower) about what deductible the borrower can take.

…it is not a sound business practice for a lender to allow the borrower to use the maximum deductible amount in every situation. A lender should determine the reasonableness of the deductible on a case-by-case basis, taking into account the risk that such a deductible would pose to the borrower and lender. [Interagency FAQ #17]