Asked and AnsweredMy mortgage lender has informed me that the cooperative in which I am purchasing an apartment has inadequate insurance coverage and has requested that the co-op increase its coverage to meet the bank’s new minimum requirements. Can the bank withdraw its underwriting due to a lack of insurance coverage by the co-op?
Yes. In the old days, a bank would request a copy of the cooperative’s “certificate of insurance”, which is a summary of all insurance coverages maintained by the co-op, and that was basically the end of the bank’s review. In light of the financial meltdown, banks are reviewing issues like insurance much more carefully. Particularly in smaller buildings, where insurance coverage is maintained at minimum levels, banks can require a co-op to increase its coverage before it agrees to underwrite a loan in that building.