FORCE PLACEMENT OF FLOOD INSURANCE
If a lender, or a servicer acting on its behalf, determine at any time during the
term of a designated loan that a building or mobile home and any personal
property securing the loan is not covered by flood insurance or is covered by
flood insurance in an amount less than the amount required under the
Regulation, the lender or servicer must:
Send a NOTICE: Notify the borrower that the borrower MUST obtain flood insurance, in an amount at least equal to the minimum amount required under the Regulation. (Sample Notice in Toolkit)
PURCHASE Flood Insurance: If the borrower fails to obtain flood insurance within 45 days of the lender’s notification to the borrower, the lender MUST purchase flood insurance on the borrower’s behalf.
CHARGE: The lender may charge the borrower for the cost of the premiums and fees incurred in purchasing the insurance beginning on the date on which flood insurance coverage lapsed or did not provide a sufficient coverage amount.
When must a force placed policy begin?
The regulation states the following: “If the borrower fails to obtain flood insurance within 45 days after notification, then the XXX- supervised institution or its servicer shall purchase insurance on the borrower’s behalf. The XXX-supervised institution or its servicer may charge the borrower for the cost of premiums and fees incurred in purchasing the insurance, including premiums or fees incurred for coverage beginning on the date on which flood insurance coverage lapsed or did not provide a sufficient coverage amount.”
The lender or servicer has some options as to when a forced-placed policy may begin. The policy may begin on the day after the existing policy expires or anytime during the 45-day period after notification. However, a policy must be force-placed by the 45th day after notification. If there is a brief delay, the lender or service provided will be expected to provide a reasonable explanation such as the delay was due to the batch processing of purchasing force-placed flood insurance policies.
Which day does the force placed insurance policy begin?
Flood insurance policies typically expire at midnight of the expiration date listed on the policy.
Policy Period: 7/22/2021-7/22/2022
Force-Placed Policy: 7/23/2022-7/23/2023
This institution does have the option to wait until the end of the 45-day period to force place the flood insurance.
For purposes of FDPA compliance, a day is a calendar day.
February 13, 2024 - Webinar: Job-Specific BSA Training for Lenders & Mortgage Loan Officers
~ Dawn Kincaid
March 14, 2024 - Webinar: Account Documentation Series: Advanced Commercial Loan Documentation
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February 29, 2024 - Webinar: Diving Deep into Force-Placed Flood Insurance
~ Molly Stull