Can someone clarify this for me? We are a "small servicer" so thankfully some of the servicing rules don't apply to us. My confusion is concerning the force placed hazard insurance. Are small servicers exempt from having to provide the 45 and 30 day notices? It mentions that "the rule against obtaining force-placed insurance in cases in which hazard insurance may be maintained through an escrow account exempts small servicers.......". So what is that statement exempting us from? That whole section all together or just if it is an escrow loan?

Not to my knowledge, that apples to all. It's exempting you from escrow. If you maintain escrow for T&I, you should have no need to FP.

We only escrow HPMLs and we have other exisiting non-escrow loans with force placed hazard. So it seems that going forward we will have to give the 2 required notices when force placing hazard, according to how you read it, right?

ltackett - You need to finish the sentence that you quoted:

"so long as any force-placed insurance purchased by the small servicer is less expensive to a borrower than the amount of any disbursement the servicer would have made to maintain hazard insurance coverage."

Yes.

I didn't finish the sentence as I don't see why we would force place something that has escrow in the first place. My only concern is whether or not we have to do the 2 required notices. I just needed to verify if the small servicer exemption part would apply.

So, if the borrower or insurance company cancels their insurance, which can happen whether you escrow or not - what do you do?

If we are notified of a cancellation and there is no new insurance then we force place.

Then you will have to follow the notification rules if the force placed insurance is more expensive than their last policy.

Thanks for helping to clarify but aren't we going to have to give the 45 and 15 day notices in all force placing cases and not just if force placed is more than their last policy?

Not if you are a small servicer and you already have an escrow account and the force placed policy is cheaper than their own policy. That's the exemption.

But for our non-escrow loans we will have to give the 2 notices before we can force place, right?

Even though we are a small servicer.

Yes - that is correct.

Can you go ahead and force place insurance, but do not charge the customer until the 2 notices have been sent out to the customer?

Thanks

Yes:

Moreover, the Bureau believes that it is unnecessary to set limitations on a servicer’s right to assess on borrowers charges retroactively because the statute establishes that a borrower has an unconditional right to a full refund of force-placed insurance premium charges and related fees the borrower has paid for any period in which the borrower’s hazard insurance and the force-placed insurance were both in place.