Topic: Force-Placed Insurance
-
One of our residential mortgage loan customers is several months behind on his payments, and the homeowner’s insurance for the property securing the loan has lapsed. The escrow account has been exhausted. Under the CFPB’s servicing rules, can we force-place the homeowner’s insurance? Or, if we prefer, can we rely solely on our mortgage protection insurance?
—
by
To answer your first question, the CFPB rules may limit your ability to force-place hazard insurance. To answer your second question, we do not believe that those rules require you to maintain or force-place hazard insurance for the borrower (other than flood insurance, when required) — meaning that you could, theoretically, rely solely on your…
-
Under the Biggert-Waters changes, do we have to wait 45 days before we can force-place a flood insurance policy?
—
by
We do not believe that anything in the Flood Disaster Protection Act of 1973 would prohibit a bank from force-placing flood insurance before the end of the forty-five day notification period, provided that you do not charge the customer for the insurance until the forty-five day period ends. See 42 USC 4012a(e). However, note that…
-
We are processing the Biggert-Waters flood insurance changes, and we’re wondering how to handle charges for force-placed insurance. Can you provide a timeline of a force-placed flood insurance policy under the new law?
—
by
As you observed, the Biggert-Waters Flood Insurance Reform Act of 2012 amended the Flood Disaster Protection Act of 1973 to allow the cost of force-placed flood insurance to include “premiums or fees incurred for coverage beginning on the date on which flood insurance coverage lapsed or did not provide a sufficient coverage amount.” 42 USC…
-
If a mortgage loan borrower refuses to pay the costs of force-placed insurance, but otherwise makes mortgage payments in full, can we consider that an event of default?
—
by
Whether the borrower’s failure to pay the new or additional payments is an event of default depends on the terms in your note. If the failure to make full monthly payments and the failure to maintain insurance on the property are both events of default in the note, then the borrower most likely is in…