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I need some feedback on the timing of obtaining flood insurance.
If you are originating a a purchase money loan that is secured by a property located in the flood zone, based my reading of the Flood laws, it is my opinion that you must have proof of flood insurance prior to making, increasing, renewing extending.
I have recently been challenged by a lender regarding my position on this as they believe as long as they haven’t funded the loan then they aren’t required to have flood insurance in place. Here’s their example: you “close” (execute note, deed of trust, Final HUD, etc.) a loan on August 1st but don’t fund until August 8th.
I believe this would be a flood violation. There is a provision for construction loans, however in the above described instance it was a purchase money loan.
Your feedback is most appreciated.
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