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Tuesday, January 14, 2014

Lenders Can Require Replacement Value Flood Insurance Coverage

According to news reports, the First Circuit Court of Appeals has ruled that it is acceptable for banks to require homeowners to purchase flood insurance that covers the full value of the home, not just the amount of the mortgage.

The ruling came from the Kolbe v. BAC Home Loans Servicing, LP case. Kolbe contended that the lender could not require a homeowner to purchase flood coverage in excess of the federally mandated minimum flood insurance, which is defined as the lesser of the principal balance of the loan or $250, 000 in special flood hazard areas, and $0 in all other areas.