I am working on a consumer real estate loan on an empty lot to build a shop. The empty lot is in special hazard flood area. Since there is not currently a structure on the lot, the insurance company cannot issue a flood policy. However, we are loaning the funds up front. Is it okay to fund the loan without the policy considering there is not yet a building, and just make sure we get the policy as soon as the building is complete, or how should we proceed with this transaction regarding the flood?
It appears that you are making a loan to build a building on property located in a special flood hazard area. Flood insurance is required. If the insurance company doesn’t understand how to insure a construction loan, finding a new insurance company may make sense.