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#1803139 - 04/10/13 01:39 PM Re: interagency guidance issued on Biggert Waters..but Burgess
RR Joker Offline
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AGree...nothing changed other than you can now cover that 15-day gap and charge for that period...that's really all there is to it.
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Flood Compliance
#1803177 - 04/10/13 02:47 PM Re: interagency guidance issued on Biggert Waters..but rlcarey
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Just a bit of an update. According to the OCC's compliance specialist out of Dallas speaking to a compliance round table, the change means that you may force place on day one if your contract allows you to purchase insurance if the borrower does not maintain it (not very tight on the language required in the contract). They are taking the stance that this is permissive and you can also choose the 31st day or the 46th day, your choice, just be consistent and mind the refund requirement. Just an FYI.

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#1803182 - 04/10/13 02:54 PM Re: interagency guidance issued on Biggert Waters..but Burgess
RR Joker Offline
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I think they are missing the point. Insurance just flat doesn't lapse until 30 days past due and the rules use the word 'lapse'. At any rate...did he say anything about not charging the account until day 46, or did he skirt that issue entirely?
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#1803192 - 04/10/13 03:05 PM Re: interagency guidance issued on Biggert Waters..but Burgess
rlcarey Offline
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There are multiple situations here that may dictate a different approach. If a customer cancels their flood insurance, or changes their insurance amount, the insurance lapses on the date of cancelation or may be inadequate on the date of renewal.

Unless the borrower pays their current premium within 30 days of policy expiration, the insurance lapses as of the original expiration date. While the bank may be covered for 30 days, the insured is not and we all know that flood insurance is about the borrower and not the bank.

If you use force placed insurance that allows retroactive cancelations, I don't see it as really that much of an issue as to when you decide to begin the coverage as the OCC indicated.

If you don't then I probably would be sticking with the 46 day timeframe, as if the borrower provides you proof of insurance after the fact, that is going to be 45 days of premium that the bank is not going to have to eat.

Since we now seem to have two different opinions from two different regulators (not to mention Dan and I smile ), I think the agencies may re-open the Q&As that they indicated were dead in the interagency release to provide further clarification.
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#1803199 - 04/10/13 03:13 PM Re: interagency guidance issued on Biggert Waters..but RR Joker
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She didn't really address when to charge the customer (short forum). I think they are basing their interpretation of "lapse" on the fact that if the full premium isn't paid within the 30 days after expiration, then the lapse is as of 12:01 of the last day of coverage as claims arising in that 30 days would not be covered for the mortgagor.

I would just add that each of the points that Randy makes was addressed including when you force place being influenced by the refund policies of your force place vendor and the level of headache that will create. The gist was that this will just give lenders more options.
Last edited by LFTbanker; 04/10/13 03:17 PM. Reason: Randy was quicker.
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#1803216 - 04/10/13 03:31 PM Re: interagency guidance issued on Biggert Waters..but Burgess
RR Joker Offline
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Yes...it's good to have a positive thing for once! wink
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#1803263 - 04/10/13 04:34 PM Re: interagency guidance issued on Biggert Waters..but Burgess
Dan Persfull Offline
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If a customer cancels their flood insurance, or changes their insurance amount, the insurance lapses on the date of cancelation or may be inadequate on the date of renewal.

In those situations then I would agree you can charge back to the date that caused the insurance to lapse or causes the proper coverage requirement to be inadequate.

My contention is when the annual premium comes due and not paid by the borrower and you start your force place procedure. In that situation it is still my opinion you cannot charge for or force place coverage until day 31.
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#1804613 - 04/15/13 03:48 PM Re: interagency guidance issued on Biggert Waters..but Burgess
ahou Offline
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When you force place and add the prem amt to the prin bal of the loan, do you have to obtain flood at the new prin bal? (that includes the force placed prem) Does this trigger a flood notice?
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#1804621 - 04/15/13 03:57 PM Re: interagency guidance issued on Biggert Waters..but Burgess
rlcarey Offline
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do you have to obtain flood at the new prin bal? (that includes the force placed prem)

Yes

Does this trigger a flood notice?

No - you are not technically increasing the loan.
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#1805734 - 04/17/13 07:03 PM Re: interagency guidance issued on Biggert Waters..but Burgess
ahkcompliance Offline
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I think we have decided we will just continue our current practice of force placing and charging on day 46. Nothing says we have to force place on day 31 is there? We've only had to force place once in the last two years.

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#1805740 - 04/17/13 07:10 PM Re: interagency guidance issued on Biggert Waters..but Burgess
RR Joker Offline
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Correct, you don't have to...they are just allowing coverage for and charging for during the gap.
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#1805789 - 04/17/13 08:28 PM Re: interagency guidance issued on Biggert Waters..but RR Joker
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Originally Posted By: RR Joker

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.


Question - The FIL on 3/29/13 says "the Act amends FDPA to provide that the premiums and fees that a lender may charge the borrower include premiums or fees incurred for coverage beginning on the date on which flood insurance coverage lapsed..."

So if we can force place effective on day 31, why do we have to wait until day 46 to charge? That part has me confused.

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#1805874 - 04/18/13 12:44 PM Re: interagency guidance issued on Biggert Waters..but Burgess
RR Joker Offline
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If memory serves me, they didn't change when they could be charged...just that they could be charged for coverage prior to day 46. It's not clear really, and I agree, it's confusing. But when is government lingo ever NOT? laugh

To be honest, I haven't thought too deeply about it because our billings come in quite a bit after that time frame, so it was a non-issue. But, it seems the general concensus on here that charging sooner wasn't specified. Perhaps they will clarify it better when they actually put it in regulatory writing?
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#1805896 - 04/18/13 01:14 PM Re: interagency guidance issued on Biggert Waters..but Burgess
Cale_N_Oats Offline
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Southern Illinois
I received an email back from John Jackwood, who is the contact at the FDIC listed on the FIL. He stated that "the lender or servicer may charge the borrower for force placed insurance premiums and fees incurred by the lender or servicer for coverage beginning on the date on which the flood insurance coverage lapsed". He also stated that It was up to the bank to decide on how to charge the borrower (applied to loan, mailed bill, etc.) Hope this helps.
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#1805927 - 04/18/13 01:57 PM Re: interagency guidance issued on Biggert Waters..but Burgess
rlcarey Offline
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Wow - that's great. He repeated the FIL to you. I also e-mailed him and asked what they mean by "lapsed" - policy expiration date or 30 days later when the mortgagee's coverage ends on a policy that is not renewed. If have yet to hear back from him. He also didn't answer the question as to when the charge can be applied.

Nice helpful e-mail.
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#1806097 - 04/18/13 05:43 PM Re: interagency guidance issued on Biggert Waters..but RR Joker
Bullseye Offline
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Originally Posted By: RR Joker
If memory serves me, they didn't change when they could be charged...just that they could be charged for coverage prior to day 46. It's not clear really, and I agree, it's confusing. But when is government lingo ever NOT? laugh

To be honest, I haven't thought too deeply about it because our billings come in quite a bit after that time frame, so it was a non-issue. But, it seems the general concensus on here that charging sooner wasn't specified. Perhaps they will clarify it better when they actually put it in regulatory writing?



Thanks Joker. That makes a little sense I guess. They didn't change WHEN you could charge, just WHAT you could charge for. Of course it's never simple...

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#1892584 - 01/31/14 04:50 PM Re: interagency guidance issued on Biggert Waters..but Burgess
Red Raiders Offline
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Compliance Land
Just to summarize, if we send a 45 day letter out at expiration or upon learning of a map change we can:

1. Force place on day 46 and charge borrower for day 46 going forward
2. Force place on day 31 and charge borrower on day 46 (charging from day 31)
3. Force place on day 1 and charge borrower on day 46 (charging from day 1)

Are all acceptable?
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#1892645 - 01/31/14 06:36 PM Re: interagency guidance issued on Biggert Waters..but Burgess
RR Joker Offline
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Yes. So long as there are no overlaps, or if you learn of overlap later, you refund.
Last edited by RR Joker; 01/31/14 06:36 PM. Reason: wrong word
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#1892684 - 01/31/14 07:27 PM Re: interagency guidance issued on Biggert Waters..but Burgess
Red Raiders Offline
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Compliance Land
Got it!

Thanks for the response.
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#1975356 - 11/07/14 09:28 PM Re: interagency guidance issued on Biggert Waters..but Burgess
RR Joker Offline
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Have there been any new interpretations on 'expired' vs. 'lapsed' on this subject. I noticed David's download on this subject appears to interpret it differently.

The Biggert-Waters Flood Insurance Reform Act provides that a lender may
charge borrowers for fees and premiums associated with the force-placement of
flood insurance coverage from the date that the borrower’s flood insurance was
no longer in effect or inadequate. For example, let’s say your borrower’s
coverage expires March 31st and your force-placement notification is sent April
1st. Hopefully, you can align the borrowers’ 30-day grace period with the 30-day
waiting period for any force-placed policy. Then, while you must allow the
borrower 45 days to obtain flood insurance coverage, on May 16th, you may
charge the borrower for any fees and premiums incurred for coverage since April
1st
if the borrower did not have adequate coverage. Any fees and/or premiums
for overlapping coverage, however, must be refunded within 30 days of
confirmation (such as a declarations page) of the borrower’s coverage. Any
force-placed insurance must also be cancelled within 30 days of confirmation of
the borrower having obtained adequate flood insurance coverage.
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#1975689 - 11/12/14 03:08 PM Re: interagency guidance issued on Biggert Waters..but Burgess
RR Joker Offline
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RR Joker
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The Swamp
Bump
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