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#1795799 - 03/18/13 05:20 PM Force Place Policy Renewal
IUalum Offline
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Kentucky
I've seen so many conflicting things on force placement and renewal that I've confused myself and I need some clarification. We have a force-placed flood policy that is up for renewal. We did not use MPPP, but bought a standard flood policy. Are we still required to give the customer 45 days to purchase insurance on their own? If we are, I understand that we can go ahead and renew the policy now but we can't charge the customer for the 45 day waiting period. Correct?
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Flood Compliance
#1795841 - 03/18/13 06:31 PM Re: Force Place Policy Renewal IUalum
Dan Persfull Offline
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Bloomington, IN
Are we still required to give the customer 45 days to purchase insurance on their own? If we are, I understand that we can go ahead and renew the policy now but we can't charge the customer for the 45 day waiting period. Correct?

Correct.
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#1800572 - 04/02/13 06:44 PM Re: Force Place Policy Renewal IUalum
CRL Offline
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Yikes! Just reading up on flood insurance before an upcoming compliance exam, and I came across this post. So for our one force placed flood policy are we required at each year/renewal period, we must re-notify the borrower of the flood insurance requirement and give them 45 days to purchase their own policy? So are we to let our force placed policy lapse and not charge the borrower for 45 days until we renew the policy?? Yikes again... we have not done that.

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#1800582 - 04/02/13 06:50 PM Re: Force Place Policy Renewal IUalum
Dani York, CRCM Offline
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CRL--It will depend on what type of policies you are forceplacing. If you are forceplacing MPPP policies, you can give the notification 45 days prior to the renewal date of teh existing MPPP forceplaced policy. If you are forceplacing any other type of policy (SFIP, private, etc), you have to wait until the current forceplaced policy expires, then send your 45 day notification, and force on day 46 if the borrower has not provided their own policy.
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#1800585 - 04/02/13 06:55 PM Re: Force Place Policy Renewal IUalum
ahkcompliance Offline
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Midwest
Yikes! I never knew we needed to inform the borrower after the expiration of a force placed policy. We have forced place two this year and are the only two we have forced placed before. We bought just a standard flood policy so when that expires, we need to send the borrower a 45 day letter and then if nothing force place again on day 46.

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#1887530 - 01/16/14 05:12 PM Re: Force Place Policy Renewal IUalum
ComplytillIdie Offline
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GA
Can I get a citation for this?

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#1887543 - 01/16/14 05:19 PM Re: Force Place Policy Renewal IUalum
rlcarey Offline
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A citation for what specifically???
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#1889198 - 01/22/14 08:56 PM Re: Force Place Policy Renewal IUalum
ComplytillIdie Offline
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Where does it say that we have to wait another 45 days after the expiration of a force placed policy?

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#1889229 - 01/22/14 09:26 PM Re: Force Place Policy Renewal IUalum
rlcarey Offline
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Galveston, TX
No one is says that you have to wait. You can force place on day one after the expiration, but you have to deliver your 45 day letter at the time the force placed policy expires, just as if it was borrower purchased and not charge them until after that 45 day period expires.

The only exception falls under the specific requirements of the MPPP program that allows a pre-45 day expiration notification.

You don't just get to renew a force placed policy forever without informing the borrower of the chance to replace that with a cheaper policy at least annually.
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#1889366 - 01/23/14 02:21 PM Re: Force Place Policy Renewal IUalum
ComplytillIdie Offline
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OK - judging by various posts about this, there are many who were not aware of this. Why is that? Is this clearly laid out in Flood rules, was this discussed in the Flood Guide which FEMA doesn't even provide anymore, or is this discussed in the Q&As? Just trying to figure out where I need to look to read regulators view on this so I can provide it to management.

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#1889388 - 01/23/14 02:58 PM Re: Force Place Policy Renewal IUalum
Dan Persfull Offline
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Bloomington, IN
When a policy expires and the borrower has not provided a valid flood insurance policy the FI must notify them they have 45 days to provide a policy to the FI at their (the borrower's) expense. If they do not provide that required coverage then the FI must force place flood insurance on the borrower's behalf.

IOWs at each policy expiration the FI must notify the borrower of their responsibility to provide flood insurance to the FI. If the borrower fails to meet that obligation then, and only then, is the FI allowed to purchase the insurance on the borrower's behalf.

339.7 Forced placement of flood insurance.

If a bank, or a servicer acting on behalf of the bank, determines, at any time during the term of a designated loan, that the building or mobile home and any personal property securing the designated loan is not covered by flood insurance or is covered by flood insurance in an amount less than the amount required under 339.3, then the bank or its servicer shall notify the borrower that the borrower should obtain flood insurance, at the borrower's expense, in an amount at least equal to the amount required under 339.3, for the remaining term of the loan. If the borrower fails to obtain flood insurance within 45 days after notification, then the bank or its servicer shall purchase insurance on the borrower's behalf. The bank or its servicer may charge the borrower for the cost of premiums and fees incurred in purchasing the insurance.
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#1889393 - 01/23/14 03:03 PM Re: Force Place Policy Renewal IUalum
rlcarey Offline
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Galveston, TX
Spelled out with step by step instructions?? I doubt that you are going to find that. If this is not how it works based on the current regulations - can you point me to where it says this is not the case? Why would the MPPP program require annual notification? After all, that is specifically a FEMA/NFIP product? Why would force placing a private insurance policy be any different (except for the timing)?
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#1889444 - 01/23/14 04:00 PM Re: Force Place Policy Renewal IUalum
ComplytillIdie Offline
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Section 339.7 of the regulation quoted above does not mention renewal of a forced placed policy. If it is automatically renewed then there is no determination that the loan is "not covered by flood insurance or is covered by flood insurance in an amount less than the amount required under 339.3" because it is still covered by the force-placed policy. Someone somewhere along the way read between the lines here and made it applicable to force placed renewals. Are there documented opinions on this? I know of banks who have gone through exams and audits and never been written up for automatically renewing the force-placed policy. I'm not saying that makes it okay - I'm just looking for something tangible. Have banks been cited for this?

Perhaps this goes back to the issue of force-placement vs charging for the force-placement - maybe the timing of the charging for the insurance is what's kept these banks from being cited for a violation? However, going back to Randy's comment that a bank can force place at expiration, just not charge until day 46 - Section 339.7 seems to contradict that. If that is the section we are going to use to require this waiting period on forced-placed renewals, the section says that the bank can not purchase forced placed insurance untile the 46th day.

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#1889476 - 01/23/14 04:24 PM Re: Force Place Policy Renewal IUalum
rlcarey Offline
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Galveston, TX
The discussion here has nothing to do with what day a bank may force place insurance (day one after expiration) or when the bank may charge the customer for the premiums (day 46 - after the 45 day letter expires). That has been settled by the regulators in both guidance documents (FIL-14-2013) and the proposed new flood regulations.

The only issue here is whether or not a bank is required to send a 45 day notice when a force placed insurance policy expires. Force placed policies automatically renew - as do borrower purchased NFIP policies, if someone pays the premium. What you are suggesting is that you can go ahead and pay another year's premium and force place for another year without notification to the borrower.

Well, all I can say, is good luck with that regardless of what you say "other" banks have gotten away with.
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#1891660 - 01/29/14 04:29 PM Re: Force Place Policy Renewal rlcarey
sapaudit Offline
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Joined: Jan 2013
Posts: 10
Texas
Our regulator (FDIC) will not allow us to renew a loan that has forced placed flood insurance on it. The reg requires flood insurance on a renewal, and we were advised that it cannot be force placed, as the policy expires upon maturity of the note. Your borrower must provide proof of insurance in order to renew.
Last edited by sapaudit; 01/29/14 04:30 PM.
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#1891681 - 01/29/14 05:09 PM Re: Force Place Policy Renewal IUalum
rlcarey Offline
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Galveston, TX
I think you missed the point. We are not talking about the loan renewing. We are talking about the renewal of the force placed insurance policy.
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#1891684 - 01/29/14 05:12 PM Re: Force Place Policy Renewal IUalum
sapaudit Offline
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Joined: Jan 2013
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Texas
You are correct, my apologies. In my defense, I have 14 Texas DOB examiners here and am distracted smile.

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