Reply To: force placed flood insurance on loan to be refinanced


Interesting question. The regulation is silent on this issue. An existing FAQ states that forced-placed insurance cannot be automatically renewed. A proposed FAQ will, if finalized, allow what you have proposed here. Technically, you are not allowed to close a loan with forced-placed insurance. If the borrower does not obtain insurance, then you can’t close the loan. With the proposed FAQ, it is clear that the agencies intend to change this position. So, the question is will an examiner cite a violation while we are on the cusp of the rule being changed. It sounds like the insurance agency will provide coverage that is effective on the date of closing, so little risk exists.