Flood Insurance Required on Recovery Account?

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Question:

We have a loan that has been charged off. The loan is secured by a property located in a flood zone. The bank is still accepting recovery payments from the borrower and has not released the interest in the collateral. The bank does not have any intention of foreclosing on the property, but does not want to release the interest. Is flood insurance required for the recovery account?

Answer:

You still have a designated loan that falls under the requirements of the flood insurance regulation.

Charging off a loan is simply an accounting transaction. It is still a legal obligation supported by a loan agreement/note and security agreement.

First published on BankersOnline.com 1/28/13