Bank as Loss Payee on Condominium Flood Policy
Issue/Inquiry
When one or more units of a residential condominium is securing a loan from a bank, should the bank be listed as the loss payee on the flood insurance policy covering such condominium?
Response Summary
A bank cannot be listed on an RCBAP as a “mortgagee” or “loss payee” when the loan is to the unit owner and not the condominium association. In order to protect its interest, a financial institution may seek to be listed on the policy as an “other interest”; however, in the event that this cannot be done, a bank should, as a matter of best practice, have the borrower assign the borrower’s interest in the RCBAP to the bank.
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