I have several force placed flood insurance policies that are for the amount of lien in coverage. Each year when these policies renew, we have currently not been adjusting the amount of coverage in relation to the pay down of the loan. Is it necessary that we do that?

Example:
2007- policy ordered for $10,000
2008- loan amount reduced to 8,000 but the force placed policy was renewed at the original amount purchased of $10,000.

If we leave it as is, are we in any kind of violation?

Help!!!

No, as long as the insurance is not exceeding the value of the property being insured.

Thanks!

And as I recall Dan has also noted in another thread that Force Placed policies do not renew, they expire. "When a force placed policy expires you must give the borrower 45 days to purchase their own insurance." The other thread also states that during those 45 days you can not charge the borrower for the coverage. The bank is always required to pay for the first 45 days of a force placed policy each year and the borrower can only be charged for the other 320/321 days of the year.

The exception is if the force placed policy is issued through the MPPP. It has a different set of guidelines and notice requirements. See Appendix 7 of the Mandatory Guidelines.

Looks like we are going to be switching from a private company to a MPPP for forced flood.

jlroberts - we are looking at switching to the MPPP as well. What steps have you taken at this point? Did you just call an insurance company and ask about it? I have contacted 1 and they had no idea what the MPPP was. They even called the NFIP and could not get any answers.

MPPP is a program not just a type of policy. Only certain vendors offer it. Try doing a google search on "MPPP flood insurance". You will get a list of websites of vendors that offer this service.

Thanks - I'll look into it.

If a policy is going to expire on May 31 and we start the 45 day notification letters after the policy expires, is the effective date of the force placed policy issued through MPPP May 31 or is it the 46 day from date of notification (because we may not charge customer the premium for the 45 days as it was stated above on this post). Is this correct?

If it is the initial forceplacement and your bank will not eat any of the premium, the effective date would be on day 46. At "renewal" of the MPPP policy the effective date sync up with the expiration date. You would have sent the letters for the expiring MPPP policy 45 days prior.

Thank You

One more question: Our force placed ins. provider told us they were participants in the MPPP and that they are following the MPPP rules and notice requirements. However, they are not listed on FEMAs list. Do I need to obtain some type of documentation from them for verification or can I just take their word for it. Could Femas list not be updated?

thanks,

I'm thinking FEMAs list is not a list of vendors per se, but more of a list of WYO companies that issue the policies. For instance one bank I worked at used an insurance vendor not on the FEMA list, but the policies were issued/written through Hartford. If I remember correctly, the policies actually stated on them that they were MPPP somewhere (I might be mistaken, that was over 5 years ago).

The policies are written through Lloyd's, London and they are not on the FEMA list.

Lloyds policies to my knowledge are private policies. We use private insurance right now for forceplacement and they are Lloyds of London. I don't believe Lloyds offers any other type of flood insurance.

Quite possibly your forceplacement vendor is using the notification timing set forth in Appendix 7 and that is what they were referring to when they said they followed the MPPP rules. I contacted my regulator recently (FDIC) for guidance to see if we could use those notification rules with our private insurance and was told no, only MPPP policies can use that to be considered in compliance.

So now we would have to wait until the 46th day to renew a force placed policy and start the notification process after the policy expires because they are issuing private force-placed policies, correct?

That is my understanding.

Thank you so much Dani

When were the new proposed Q & A's regarding force-placement made final? Q & A # 60, #61 and #62

thanks,

They haven't.

Are we required to follow them if it is not final? The reason I ask is because our force-placed ins. vendor issues a policy on the 46th day, but charges the customer the cost of coverage back to the lapse date (includes the 45 days). They are not following the proposed Q&A's until made final. They are following 12 CFR 339.7 - "The bank or its servicer may charge the borrower for the cost of premiums and fees incurred in purchasing the insurance".

thanks,

To my knowledge, the Q&A are just clarifications of what was already supposed to be happening, not new rules or new guidance. I have worked with our examiners since 2004 and they have always enforced the no charge during the 45 days.

They explained it to me from the standpoint that the regulation stipulates that the bank must give the borrower 45 days to purchase their own insurance at the lower non-force-placed rates. If we were to charge for the 45 day period, then in effect, we have not allowed the borrower the opportunity to purchase it themselves at a lower premium.

I concur with Dani's statement.