Answer:
The bank not only can but they are required to by law. If the policy lapsed last year and you are just now getting around to force placing you have a more serious problem.
You are required to send the borrower a notice giving them 45 days to obtain flood insurance when you learn the insurance has expired or is insufficient. If they don't provide the insurance within that time then you are to force place on day 46.
You need to review your follow up procedures and make sure there are no others in this position. Hopefully this one is an isolated incident. Your bank is facing some serious Civil Money Penalties if they don't have a good flood insurance program in place to insure they are complying with the flood insurance requirements.
First published on BankersOnline.com 9/07/09
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