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#1678941 - 03/16/12 09:19 PM Charge interest on force-placed insurance?
Compli(cated) Offline
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Joined: Mar 2011
Posts: 185
Wisconsin
We have a discussion going on: can force-placed insurance, attorneys fees in an action for collateral recovery, etc. be added to the principal of the loan (and thus accrue interest)?

I'd appreciate anything I could reference for this. Thank you and Happy Friday!
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Lending Compliance
#1678976 - 03/17/12 03:10 AM Re: Charge interest on force-placed insurance? Compli(cated)
jlroberts Offline
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jlroberts
Joined: Sep 2009
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Ohio
It might be state law. You'll have to read your Note and Mortgage to see if you have it in your loan agreement. We use the standard Fannie/Freddie Mac Ohio Mortgage and it states we can. We don't do loans in Wisconsin but I looked in our document selects and the Fannie/Freddie Wisconsin Mortgage says the same thing. If you use the Fannie/Freddie Mortgage then read sections 5 and 9, and see if they apply. You can also have your bank attorney verify your findings.

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#1679039 - 03/19/12 12:39 PM Re: Charge interest on force-placed insurance? Compli(cated)
Compli(cated) Offline
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Joined: Mar 2011
Posts: 185
Wisconsin
Thanks, jlroberts. I didn't specify, but the question was related to consumer loans, not Fannie/Freddie. Our consumer loan documents to not say that we can charge interest on those types of fees, but it seems like the practice isn't uncommon. Just wondering if there are laws against it, it's always easy to write it into our contracts, if it isn't illegal.

I am not finding anything in the state law, anyone know any federal regs that would prohibit it? I suspect not, since Fannie/Freddie are doing it...
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#1679050 - 03/19/12 01:05 PM Re: Charge interest on force-placed insurance? Compli(cated)
Dan Persfull Offline
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Dan Persfull
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Bloomington, IN
See my tag line!!!!

If state law is "silent" and if the loan and or security agreement does not discuss this in its default remedy section then I would opine you can't accrue something you didn't contract for.
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#1679052 - 03/19/12 01:07 PM Re: Charge interest on force-placed insurance? Compli(cated)
Kathleen O. Blanchard Offline

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Kathleen O. Blanchard
Joined: Dec 2000
Posts: 21,293
Originally Posted By: doedoe
Thanks, jlroberts. I didn't specify, but the question was related to consumer loans, not Fannie/Freddie. Our consumer loan documents to not say that we can charge interest on those types of fees, but it seems like the practice isn't uncommon. Just wondering if there are laws against it, it's always easy to write it into our contracts, if it isn't illegal.

I am not finding anything in the state law, anyone know any federal regs that would prohibit it? I suspect not, since Fannie/Freddie are doing it...


Check with counsel. Generally, your documents must allow for something even if allowed by law. The documents are your contract with the customer.
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#1679061 - 03/19/12 01:24 PM Re: Charge interest on force-placed insurance? Compli(cated)
Compli(cated) Offline
100 Club
Joined: Mar 2011
Posts: 185
Wisconsin
Thank you all for responding. I understand that it should be in the contract if we were to do it, I just wanted to make sure that there is nothing prohibiting it from even being added to the contract.
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"I was gratified to be able to answer promptly. I said I don't know." - Mark Twain

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