We closed a loan with a binder in place for flood hazard insurance. The customer never paid the premium. When I contacted the agent, he said that the customer had decided not to buy the insurance. The customer was aware that we would have to force-place insurance.

I don't remember reading anything about a case like this in the FAQs. Do I need to give them a "45-day notice" now? or consider that the 45 days have past since the loan closed and go ahead and force place?

First mistake...you can't accept a binder.
Second mistake...you must have proof of payment.

force-placement is not intended to be a cure for situations involving the origination of the loan...only for lapses in the future,, so I have no real answer for you on your second paragraph...hopefully someone else will venture advice!

Binder's are not acceptable proof of insurance for flood insurance. You must have a copy of the application/dec sheet and proof of payment. If you closed without this proof then you have a violation.

I would seriously consider filing a SAR on both the insurance agent and borrower for mortgage fraud.

You must send the borrower a 45 day notice and begin your force placement procedures immediately. Or better yet you should demand the loan be paid for default of its insurance provision.

Thanks. That was the conclusion I was coming to. Problems like these keep our job so interesting!

And fix your process so that this doesn't occur again-no binders, proof of payment required. That closes the loop.

We had an application with copy of check at closing once but then received notice later (after closing) that the check bounced so our borrower did not have coverage.
We started the 45-day process by sending the initial letter to the borrower as soon as we found out the check had bounced.