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#1762626 - 11/29/12 10:50 PM flood proration
banker-12 Offline
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We received a revised flood declaration page that expires May 2013 - name of the policy changed from the 1st owner to our borrower. The policy was paid for the year by the 1st owner. When the name changed, the insurance company is going to prorate the policy thru the expiration date; the borrower needs to pay the difference to keep the policy in force. The settlement statement reflects a flood proration thru May 2013 to the 1st owner.

We received an invoice from the insurance company that states "to avoid policy cancellation, checks must be delivered day of closing".

I think our borrower needs to pay the prorate amount before closing. I'm told that the policy is still in force because it was paid in full by the 1st owner and it has not expired.

I'm I right to ask for the payment receipt from the borrower before loan closing even though we have a declaration page because of the proration.

thanks,

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Flood Compliance
#1762630 - 11/29/12 10:55 PM Re: flood proration banker-12
rlcarey Online
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rlcarey
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Posts: 77,576
Galveston, TX
Who's going to get the payment to the insurance company the day of closing if they don't pay in advance?
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#1762655 - 11/29/12 11:37 PM Re: flood proration banker-12
banker-12 Offline
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I'm told that the flood policy that the seller had and paid for(which changed to our customers name)will remain in force. The seller is going to get the proate amount from our borrower the day of closing as noted in the settlement statement. The insurance company will not receive payment - already paid for.

is it okay?

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#1762661 - 11/29/12 11:51 PM Re: flood proration banker-12
Kathleen O. Blanchard Offline

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Kathleen O. Blanchard
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If the funds are to be paid to the seller, why was there an invoice from the insurance company?
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#1762662 - 11/29/12 11:54 PM Re: flood proration banker-12
banker-12 Offline
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Joined: May 2007
Posts: 1,185
The invoice also states other insurance premiums. It states: Flood Policy - check payable to "seller" for the amount of $

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#1762665 - 11/30/12 12:10 AM Re: flood proration banker-12
Kathleen O. Blanchard Offline

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Kathleen O. Blanchard
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Posts: 21,277
Ah ha. Then I guess they can just exchange funds at closing.
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Kathleen O. Blanchard, CRCM "Kaybee"
HMDA/CRA Training/Consulting/Mapping
The HMDA Academy
www.kaybeescomplianceinsights.com

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#1762666 - 11/30/12 12:20 AM Re: flood proration banker-12
rlcarey Online
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rlcarey
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Posts: 77,576
Galveston, TX
Now that I think about it, I guess I am confused why the insurance agent/company is even involved, other than processing a General Change Endorsement naming the new owner that is taking title to the property. Any settlement for the prorated policy would be handled through the settlement process through a payment from the buyer to the seller. The insurance company would not be involved as the insurance has already been paid for. Why do they need a check?? Whether the seller even wants to get paid for the proration is a matter of the sales contract. The insurance company is totally out of this picture.
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The opinions expressed here should not be construed to be those of my employer: PPDocs.com

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#1762676 - 11/30/12 05:17 AM Re: flood proration banker-12
banker-12 Offline
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Joined: May 2007
Posts: 1,185
The insurance company will not get a check. The invoice they provided also includes the premiums for hazard insurance payable to them and for some reason they also included the flood in the same invoice but it states "check payable" to seller.

The insurance company helped our customer and seller determine the prorate amount. The insurance co. stated that the decision was made by all parties to handle the proration at settlement instead of them reimbursing seller and getting the buyer to pay the difference to them.

So is it okay because the insurance company is not receiving a check/payment for the flood policy at settlement and the prorated amount is between the seller and the borrower?

thanks

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#1762684 - 11/30/12 11:23 AM Re: flood proration banker-12
rlcarey Online
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rlcarey
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Galveston, TX
It is fine as long as you have a copy of the original declaration page and a copy of the General Change Endorsement naming the new owners as the insured party.
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The opinions expressed here should not be construed to be those of my employer: PPDocs.com

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#1762731 - 11/30/12 02:40 PM Re: flood proration banker-12
banker-12 Offline
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Joined: May 2007
Posts: 1,185
thank you all for your assistance

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