Proof of Flood Insurance - Part 2
By David Dickinson
Let's say you have a loan secured by improved real estate located in a Special Flood Hazard Area. The loan is now several years old. Do you need to keep all of the insurance policies since the loan was closed?
We have heard some banks are being criticized for not having proof of flood insurance kept in the files throughout the life of the loan. I don't think you'll find anything in the regulations or FEMA Guidelines to support this criticism.
I believe it is prudent to keep the first policy to prove you had insurance before closing the loan. You should also keep the latest policy to prove you have insurance in place. However, all of this could be retrieved from the insurance agent if you need to prove it to the examiners.
This may be something you want to discuss with your examiners. If they are requiring policies to be kept since loan closing, ask them where this is required. I don't think they'll be able to support this position.