[rcooper]

Question: We are working on a loan located in a flood zone. Do the regulations require that we see the actual flood policy before we close, or will a binder suffice? We were thinking that we must examine the actual policy, but we can’t find it anywhere. We rarely have a flood loan and we were just unsure.

Answer: The NFIP doesn’t recognize binders. You can obtain either the declaration page of the policy or the insurance application along with proof of payment.

Chatbox Comment from Member: We had a case, where we had a flood application and proof of payment from the insurance agent. The agent didn’t send the payment to the company, so the policy was never issued. This was not caught for three months. We have tickler set up to track when the actual policy is received. That is how we caught the issue. We had a receipt signed by the owner of the insurance agency. After this incident we only except receipts form the issuing company not the agent writing the policy. The agent admitted it was his fault, but that still didn’t give the bank retroactive coverage. I even spoke to FEMA, but because the proof of payment wasn’t from the issuing company we weren’t covered per FEMA.

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