Skip to content
GeoDataVision
Thread Options
#1695124 - 05/02/12 10:00 PM Loan Renewal - Force placed coverage
Ninky Offline
Gold Star
Ninky
Joined: Nov 2002
Posts: 357
Our group heard a flood presenter recently that stated loans made, increased, extended, or renewed must be insured by borrower purchased insurance and not forced placed insurance. That some CMPs had been imposed. He said this was addressed in the Q&A's. I cannot find anything in the Q&A'regarding loan renewals & FP. I understand that a renewal & extension is a triggering event and that we must do a flood determination. I also understand that you cannot force place to originate a loan. But there are scenarios when a policy is force placed on a commercial credit, then a month later, the loan renews. There is coverage in place under force placement. It was not force placed in order to originate or close the loan. Is this specifically addressed in the reg or guidelines? Can someone direct me to an answer as to why the FP policy already in force is not considered adequate coverage for a renewal or if this specific scenario is actually a violation?

Return to Top
Flood Compliance
#1695130 - 05/02/12 10:39 PM Re: Loan Renewal - Force placed coverage Ninky
Al Miller Offline
Diamond Poster
Al Miller
Joined: Oct 2000
Posts: 2,416
Pleasanton CA USA
In the Mandatory Purchase Guidelines, Section C, 52.h (under Force Placement) the second paragraph references origination. I take origination to mean Make and Renew, not just make.


Al
_________________________
Al Miller, CRCM
Opinions expressed are my own and not necessarily shared by my employer.

Return to Top
#1695136 - 05/02/12 11:27 PM Re: Loan Renewal - Force placed coverage Ninky
rlcarey Offline
10K Club
rlcarey
Joined: Jul 2001
Posts: 79,633
Galveston, TX
Plus, why would you renew a loan that is in default?
_________________________
The opinions expressed here should not be construed to be those of my employer: PPDocs.com

Return to Top
#1695176 - 05/03/12 12:19 PM Re: Loan Renewal - Force placed coverage Ninky
RR Joker Offline
10K Club
RR Joker
Joined: Nov 2002
Posts: 20,654
The Swamp
Okay...in my discussions with examiners, they seem to all agree that if FP insurance is in effect when a loan renews and not about to expire...you can go on with that policy just like you would with a 'normal policy.

Just sayin. I've had NO PROBLEMS with this.

Talk to YOUR regulator and get their stance on this.
Last edited by RR Joker; 05/03/12 12:20 PM. Reason: reworded
_________________________
My opinion only. Not legal advice.

Say you'll haunt me - Stone Sour

Return to Top
#1695270 - 05/03/12 02:50 PM Re: Loan Renewal - Force placed coverage Ninky
Ninky Offline
Gold Star
Ninky
Joined: Nov 2002
Posts: 357
Good advice RR.

Randy are you saying because there is a FP premium already added to the Note at time of renewal, you consider that loan in default?

Return to Top
#1695273 - 05/03/12 02:55 PM Re: Loan Renewal - Force placed coverage Ninky
RR Joker Offline
10K Club
RR Joker
Joined: Nov 2002
Posts: 20,654
The Swamp
It technically is in default because they are not keeping insurance in force as required in your loan agreement.

However, any LO that I know would look at you like you grew horns if you tell them that. wink
_________________________
My opinion only. Not legal advice.

Say you'll haunt me - Stone Sour

Return to Top
#1695284 - 05/03/12 03:19 PM Re: Loan Renewal - Force placed coverage Ninky
rlcarey Offline
10K Club
rlcarey
Joined: Jul 2001
Posts: 79,633
Galveston, TX
RR - you are correct. I have gored a LO or two in my time smile

I have always looked at a borrower that was too lazy to get their own insurance and just pay the huge increased cost in premiums of being suspect of a great deal more going wrong than what is on the surface.
_________________________
The opinions expressed here should not be construed to be those of my employer: PPDocs.com

Return to Top
#1695287 - 05/03/12 03:22 PM Re: Loan Renewal - Force placed coverage rlcarey
RR Joker Offline
10K Club
RR Joker
Joined: Nov 2002
Posts: 20,654
The Swamp
laugh
_________________________
My opinion only. Not legal advice.

Say you'll haunt me - Stone Sour

Return to Top
#1695305 - 05/03/12 03:42 PM Re: Loan Renewal - Force placed coverage Ninky
Ninky Offline
Gold Star
Ninky
Joined: Nov 2002
Posts: 357
But once it's covered under FP, they do have coverage and are paying the premiums via their Note. The premiums are financed, but they are paying them. I understand the default status during the 45 FP period, but you still consider it default once coverage is in place?

Return to Top
#1695371 - 05/03/12 05:00 PM Re: Loan Renewal - Force placed coverage Ninky
rlcarey Offline
10K Club
rlcarey
Joined: Jul 2001
Posts: 79,633
Galveston, TX
Yes, loan agreements typically require the "borrower" to maintain appropriate hazard insurance. They are not, they are in default.
_________________________
The opinions expressed here should not be construed to be those of my employer: PPDocs.com

Return to Top