With the Atlantic’s most powerful hurricane ever approaching the Florida coast, lenders may be wondering how to handle loans in their pipeline with closings scheduled over the next few days. No lender wants to close a loan only to have the secured property subsequently destroyed with no insurance to make them whole. One factor to consider in the “to fund or not to fund” decision is the actual terms, conditions, and stipulations of the loan commitment. Those conditions probably have language regarding home insurance which, as Irma gets nearer, may be impossible to obtain. Florida, for example, allows insurers to suspend the binding of policies due to approaching hurricanes. The FAR/BAR Real Estate Sales Contract contains language regarding closing extensions where insurance is unavailable due to these situations. Additionally, it essentially puts the risk of loss on the seller for damage to the property. If the lender refuses to fund and the property is destroyed, for lender liability to arise, the seller would first have to establish a case against the borrower for specific performance and then the borrower would have to establish the lender’s duty to fund. The closer Irma gets, the less risk to the lender of not funding so it’s all about timing. As you weigh the risks involved, AMLG is here to help you make the best decision.
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