Thanks Randy..I know I'm overthinking this...it's the letter, or re-working of the letter and procedures that's twisting me up somehow...trying to make it make sense!

Dan, I agree with your analogy of when the policy lapses, and it's been a long-standing issue that we have had 15 days of gap with the way the old rules were written.

Before we had to wait until day 46 to FP. Now, we could FP on day 30, but not add the premium to the loan until day 46, and refund if proof is otherwise given.

May be more trouble than it's worth, actually!

O.K., now that that is settled, I'm resubmitting this question for consideration please:

I saw the FIL that was released last week and had a question.

This FIL pointed out two things. 1) That certain pieces of the Act became effective upon enactment and 2) the other provisions are not effective until regulations are issued. One of these sections has to do with flood insurance escrow for residential property effective for all outstanding and new loans as of 7-6-14. Have you heard any discussion as to whether this will mean we have to have a fully funded escrow account by that date or if it means that we just will need to have established an escrow account and begin the process of getting it properly funded?

Yo, I don't think your question can really be answered until they put that part into regulation.

Understood RR, I was just wondering if there was any industry or regulator "buzz" out there?

However it works out, it is not going to force an escrow on a borrower that doesn't already have one. So, from that perspective, it will be on a go forward basis. If they already have an escrow, flood has to already be included.

Well the wording of the B-W provision in section 100209(b) indicates it will apply to all mortgage loans requiring flood insurance that are outstanding on, or entered into on or after [July 6, 2014]. I know that regulators are trying to get some parts of B-W clarified (there's more wrong than Congress patched up with the amendment restricting escrow to non-business loans). I wonder whether they'll ask for the "outstanding on" language to be removed, regulate an exception to it, or make servicers add the escrow for those who don't already have it.

So if we have a customer on July 6, 2014 who has an escrow set up for taxes and insurance and also has flood insurance. The flood insurance is paid annually by the borrower and is not included in the escrow. Will the flood ins need to be included in the escrow account?

It's already required to be escrowed if you escrow for anything else.

That is what I thought.

I have discovered two loans that have escrow for taxes but NOT flood insurance. One loan was done in 2005 and the other in 2010. Do we have to go back and escrow for flood?

We just had a customer present us with 4 years worth of flood insurance and wants a refund of the 4 years of forced place insurance premiums that we added to the loan. Does this go retroactive or just current policy period? Plus we will verify with ins company that the customer did not just get a policy then drop coverage and keep the Declarations page.

Current policy - sure. Policies paid for and already expired - ask them where were they four years ago when you were sending them force place notices and copies of force placed policies. They are a little late to the game in my book.

Some years ago we had a big issue during an exam because when we force placed, we retroactively applied the coverage to the date of expiration of the previous coverage and charged the borrower. The OCC said that we could force place but could not charge the customer for the 45 days. We changed our procedures and now forceplace on the 46th day. The bank bought gap insurance to protect itself for the first 45 days.

My question is that the new guidance says we MAY charge now beginning on the date the existing coverage but this does not mean we MUST do it. Correct? I think we can just continue to do what I describe above?

I think we can just continue to do what I describe above?

Yes you can.

Our Senior Lending Officer just came from a conference held by the FDIC during which the speaker, who is an examiner, stated that the 45 day rule no longer applies and thatwe are able to force place and charge our customers after the 30 day grace period. I have read through the above comments and don't see that interpretation in any of them, so i just wanted to ask can we force place and charge the customers or do we still have to wait 45 days before they are charged?

I think this was fully discussed in this post - did you go to the beginning - there are more than one page of posts.

Yeah I read all the pages. The examiner I mentioned in my first post says after 30 days you can force place and charge the customer for the full amount same day. I guess I am confused as to whether you can charge them for only the 15 days of lapsed coverage or for the full amount of the insurance?

That is the discussion that Dan and I were having. Dan indicated that the bank was covered for 30 days after expiration (different than if the borrower canceled their policy) and he thought you could force place and charge from day 31. I think that you might be able to go back to day one, but I guess we will wait to see if there clarified from other than some examiner in a seminar. Going back to day 31 is a safe bet in either case under the new law and interpretations.

If I'm understanding Cale's question correctly, he's asking if you can go ahead and charge on day 31. My understanding is you can make the insurance effective beginning day 31, but you can't apply it to the balance until day 46.

Oh - OK. That would then seem to be the case. Sorry - either not enough or tooo much coffee - not sure which it is All I know is that it is rapidly approaching martini hour.

I hear ya!

Sorry for the confusion. Yes, RR that is what I was trying to get clarification on because the guidance mentions charging the customer "fees" and "premiums", but was confused on when it could be applied. Thanks to you both!

But didn't it also say that if they supplied you with evidence of insurance within 30 days then you couldn't charge them anything but if they didn't get insurance in the first 30 days that you could?

That is what I was thinking too QM.......

What they said was:

Require the lender or servicer, within 30 days of receiving a confirmation of a borrower’s existing flood insurance coverage, to terminate any force-placed insurance and refund to the borrower all force-placed insurance premiums and any related fees paid for by the borrower during any period of overlap between the borrower’s policy and the force-placed policy.

That should be no different than what is happening now. You can't double insure the borrower.

Many banks use force placed insurance which allows them to retroactively cancel insurance back to the date that the borrower coverage started and receive an appropriately prorated refund.