Can we allow borrowers to use the maximum deductible available to reduce the cost of flood insurance?
It’s permissible, but the Bank should not allow it in every case. The Bank should determine “the reasonableness of the deductible on a case-by-case basis, taking into account the risk that such a deductible would pose to the borrower and lender.” Note that the Bank also should not allow the borrower to use a deductible equal to the insurable value of the property in order to avoid having to purchase flood insurance.
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