C/P loan - force place?

Borrower has a c/p loan that originated a few months ago. Borrower used own funds to begin construction. Management does not require flood insurance to be purchased prior to closing for construction. Borrower has now gone to purchase flood insurance and has the 30 day wait. Now borrower wants to draw on construction line, but policy is not effective.

Since construction is already past the point of the slab being poured, the bank plans to start force placement procedures.

Is it possible to allow the draw if force placed insurance is in place?

Management does not require flood insurance to be purchased prior to closing for construction.

Management fell on their own sword. IMHO force placing in order to advance in this situation is just as much a violation as making the loan without flood insurance in place.

Thank you! That's exactly what I thought.

If this were me, I’d bring this scenario up at a management meeting and explain how their position created this problem. In most cases, you should require flood insurance BEFORE closing a construction loan. Your example proves why.