Abundance of Caution Collateral & Flood Insurance

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Question:

The bank is making a loan and taking property (with building) as an abundance of caution. This property is located in a flood zone. Is flood insurance required when our collateral is taken as an abundance of caution?

Answer:

Yes.

From page 20 of the Mandatory Purchase of Flood Insurance Guidelines: . . . The mandatory purchase provisions apply even on those loans where real estate is secured out of "an abundance of caution." . . .

First published on BankersOnline.com 5/16/05