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Force-Place Question

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  • #3462
    kjgreen
    Member

    In regard to the “new” force-place rules:

    We have two customers that never get their own flood insurance. We always have to force place. We get the expiration notice for March 30. On March 30 we send a 45 day letter and force place the insurance. Customer never provides evidence of coverage, so on day 46 we assess the premium to day 1 of force-placement to the customer’s loan.

    This all sounds compliant, correct?

    #3478
    rcooper
    Keymaster

    If you have a standard policy in place you need to follow the proper notification process outlined in the flood regulations. That is send the 45 day notice and allow the borrower time to obtain a policy. You may not force place or charge them for insurance during that time. On day 46 you should force place if they haven’t obtained insurance. Here’s a link to the regulation: https://www.ecfr.gov/cgi-bin/text-idx?c=ecfr&SID=3d5de1e4a10cfcd995b50851357bba4d&rgn=div8&view=text&node=12:1.0.1.1.20.0.8.7&idno=12

    If you have an MPPP policy in place you may renew this policy on it’s renewal date rather than waiting until 45 days after it expires. But you need to follow the MPPP notification process which includes letters that go out 45 days before the policy is set to expire, 15 days before it is set to expire, and a final letter when the policy is renewed (the latter two are only required in the event the borrower doesn’t purchase the required insurance.) You can find the MPPP notification process here in Addendum 2: https://www.fema.gov/library/viewRecord.do?id=3820

    #3490
    kjgreen
    Member

    Thanks rcooper. The following is an excerpt from FIL 14-2013. How does this change our process? We have been debating this and can’t seem to come to an agreement. The fact that the amdendment states that we can charge the borrower premiums and fees from the date of lapse, provided that they do not get their own coverage, is throwing us off.

    Biggert-Waters Act Amendments
     Force Placement: The FDPA provides that a lender or its servicer must notify a
    borrower if it determines that the flood insurance coverage on the improved real
    estate or mobile home serving as collateral for the borrower’s loan has expired or is
    less than the amount required for that particular property (42 USC 4012a(e)). The
    notice must inform the borrower of the need to purchase flood insurance. If the
    borrower fails to purchase flood insurance within 45 days after notification, the lender
    or servicer must purchase flood insurance on behalf of the borrower and may charge
    the borrower for the cost of premiums and fees incurred by the lender or servicer.
    The Act amends the FDPA to:
    o Provide that the premiums and fees that a lender or servicer may charge the
    borrower include premiums or fees incurred for coverage beginning on the
    date on which flood insurance coverage lapsed or did not provide sufficient
    coverage amount;
    o Require the lender or servicer, within 30 days of receiving a confirmation of a
    borrower’s existing flood insurance coverage, to terminate any force-placed
    insurance and refund to the borrower all force-placed insurance premiums and
    any related fees paid for by the borrower during any period of overlap
    between the borrower’s policy and the force-placed policy; and
    o Require a lender or servicer to accept as confirmation of a borrower’s existing
    flood insurance policy a declarations page that includes the existing flood
    insurance policy number and the identity and contact information for the
    insurance company or agent.

    #3637
    deejohnson50
    Participant

    Our area has been remapped and some existing customers are now in a flood zone. I am trying to find out exactly why information we need to send to the borrower. From what I have read, the borrower should receive a copy of the flood determination along with a letter stating the flood insurance is required within 45 days. Are you guys sending one letter notifying the borrower of the change and the new requirements, and the 45 day time period and a second letter when the 45 days is up? Do we need to explain the flood insurance limits, etc. This is a first for us and we need to get it right. Any advice, help, suggestions, etc will be greatly appreciated. Thanks

    #4106
    HMDA Guy 78
    Participant

    Has anyone had to force-place a policy since 10/1/13? Just today I became aware that effective 10/1/13, the “no waiting period” for lender required policies not in connection with a loan transaction (i.e. “force-placed policies”) has been eliminated. This means that if I ordered a force-placed policy today and we made the payment to our local insurance agent vendor, that the policy would not take effect for 30 days until 11/25, whereas before it would be effective today – date of payment.

    I am wondering how this elimination of the “no wait” period is going to affect us with the 45-day timing. We have two customers who – while not in writing – have in practice for years relied on the Bank to do the force-placing of their flood insurance (except the initial year in connection with their loan closing). Do I now have to “order” and get payment made on day 16 after expiration of the policy, so that on day 46 – 30 days later – the policy is in effect?

    I can’t see any other way around it yet but I need to dig into the changes more….

    Here is a link to some changes effective 10/1/13 for anyone interested:
    https://www.floodpro.net/Shared/Generic/News/BW_October_2013_changes.pdf

    Any thoughts are welcome!! Help. 🙂

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