I have a situation where our customer has a RCBAP flood policy. The lowest of the three is the replacement cost value; however, the coverage on the policy is short $125.00 and our deductible is $1,000 when we are force placing for gap. This seems silly since the deductible is higher than the coverage amount. Do I have to force place for the $1,000 to comply with the Reg? I’m new to the world of flood and help would be appreciated!

Give us the replacement cost value from the policy declaration and the number of units and the total amount of insurance and the loan amount. Thanks

RCV: $211,125
Number of units: 196
Insurance: $211,000
Loan Amount: $242,824.11
Thanks!

So, the total replacement cost listed on the policy is $41,380,500 and the flood insurance coverage is $41,356,000? That is just stupid on their part. Technically, you are $125 short. You say you are force placing, so this must be an existing loan? What were the numbers when you first made the loan? You cannot force place to make a loan.

You are correct that this is an existing loan and while my compliance department did not approve the flood portion, senior management gave the okay to consummate the loan with insufficient flood coverage ($125 short). We're currently at the one year and I've recently learned and taken over flood which brings me here Do I force place for the $1,000 to comply with the Reg being $125 short?

Well, I hope your senior management have a large checkbook for the bank's violation and the potential CMP against them personally for approving a knowing violation of the regulation.

But that is water under the bridge so to speak. Personally, I am not sure how you are possibly going to correct this at this point. The borrower could purchase a dwelling policy, but the minimum amount they could purchase would be $1,000 and that would be the same as the deductible. I can't say how your forced placed insurance would work, but if you do it, I suggest that the lender should be absorbing the cost, as I could easily see this being considered a UDAAP situation, since the bank knowingly created this situation.

Thank you, I appreciate your help!