[MCCompliance]

Have a new situation for us. We have a commercial line of credit secured by a first lien on a primary residence. Residence is located in a flood zone, loan closed with flood insurance. We were just notified the policy has lapsed and because payment was not received within the “grace period” there is now a 30 day wait for coverage. Borrower has already paid for the coverage, but we are still without coverage at the moment. Line of credit has a zero balance. My question is, can we freeze the line of credit until the flood policy is in force or must we force place on the full available amount of the line?

I see in the rescinded FEMA guidelines “In those instances where there is no policy on the collateral, the borrower must, at a minimum, obtain a policy for drawing on the line.” Can we use this to allow us time for the borrower paid policy to become effective?

[rcooper]

Freezing the account doesn’t eliminate your requirement to comply with the flood rules.

I think following the advice in the rescinded Mandatory Purchase Guidelines would be fine; I don’t know of any recent agency guidance that contradicts that particular information.

[Author]

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