Hi Kids,

I know this one has been discussed previously on the threads. I'd like to know how many of you are experiencing an increase in borrowers opting to not purchase their own insurance in lieu of force-placed insurance because the FP is cheaper.

I'm using a Lloyds WYO policy and it is coming out to be substantially cheaper than what the borrower was quoted for a NFIP policy.

My Lloyds policy is at least to the standards of the NFIP program and insures the bank and borrower (additional insured).

I'm talking several thousand dollars difference.

Let's hear from the users out there. What are you
experiencing?

If you have experienced this scenario, PLEASE SPEAK UP.

Lloyds WYO policy

WYO usually refers to companies, such as State Farm selling NFIP policies. You mean a true private policy correct?

If that is the case and they refuse to by their own, so be it. Why not refer them to go direct to Lloyds??

My mistake Randy. Yes I mean a true private policy, through Lloyds.

We have a few (and expect a few more) policies that were less than $1,000 last year and this year have exceeded $10-$20k. We have no experience with any private policies. How do you know it is an acceptable private policy? What features are you comparing to a NFIP policy?

We have a few (and expect a few more) policies that were less than $1,000 last year and this year have exceeded $10-$20k.

That, even under the pre-rollback rules, was virtually impossible if the borrowers did not let their policy lapse and paid their premiums before they were due. Any rise in existing premiums were phased in. New flood policies were another matter.

While this booklet has been rescinded the information on acceptable private insurance policies is probably still valid until further guidance from the regulators is issued. Start on page 57:

http://hazardmitigation.calema.ca.gov/docs/10040_NFIP.pdf

You might consider an outside review by an educated industry source other than someone working for the insurance company you are using. Also consider an NFIP endorsement to the private policy and management approval for each one used for control purposes. We are experiencing the same thing - $1200 policy increasing to $4800 for a moderate-income borrower; a purchase of a small commercial structure increasing from a couple thousand to $12,000 per year.

The Lloyds policy is compliant with what Randy provided above and also include the NFIP standards endorsement.

Anyone else encountering this?

We use Lloyd's policies and had a customer in the past make this claim after receiving a letter due to a map change, but we were unable to verify it since they basically just called us up and said, "I'm going to let you forceplace on me because it's cheaper than getting my own policy." They never produced a document showing what their borrower-purchased policy would have cost, so I can't tell you if that was actually true.

Since all the changes to premiums in teh aftermath of Biggert-Waters, I haven't heard any of our customers make the claim.

We just accepted our first one last month. It has the endorsement, and we reviewed in house and accepted. We did not seek an outside expert.

Hello again,

Has anyone out there heard of an insurance agent requiring a letter from the bank (in order to cancel a current policy) when the customer opts to let us forceplace?

I've gone round and round with an insurance agent who won't cancel a customers policy because we are using a non NFIP policy for forceplacement.

No need to discuss the fact that the customer has opted to cancel their policy (management is going to let him do it)

Anyone heard of this one?

Well, typically a customer just won't pay their premium and a policy is canceled by the NFIP. An insurance agent has no say on that.

If they are trying to cancel mid-term, I doubt that it meets a valid cancellation criteria under NFIP.

Pull out the flood insurance manual and read the section on cancellations.

As far as the bank being in collusion in this manner, I think the bank has to think long and hard. The failure of the borrower to maintain their own insurance represents a default on the loan, regardless of the price. You start waiving defaults for this or act in an accommodative manner, I think you are setting a very bad precedent. You need to be having a discussion with your legal counsel. Also, you could be accused of selling insurance without a license.

we are starting to see this happen a lot more. Borrower does not want to pay for an expensive elevation survey, so their flood insurance gets cancelled. We end up force placing and are seeing in most cases the force placed flood is less than what they can get on their own through the NFIP. We see no problem whatsoever in this scenario, in fact we embrace it since we know they have an affordable policy that is at leas as good as NFIP. Plus, since we are paying the premium, there will be no lapse.

You just better hope that in a big disaster the insurance company that you are using doesn't fail. You might not "embrace" it quite as much at that point.

When you are using your forced place policy (through Lloyds) are you getting a declarations page that lists all of the elements that are required? Or are the requirements for a declarations page not applicable from private insurers?

I have used Lloyds in the past and did not receive a declarations page but a certificate based on the Master Policy.

I have had a couple that were much cheaper to force place. One was just a small amount like a couple hundred while another saved the customer over 3,000.

Still messing with this stuff. I like the fact that I can immediately place a Lloyd's policy. I like my vendor, but I can't continue to let these customers see the lower premium amount.

Can someone please PM me the name of a vendor they have used for NFIP policies that they have been happy with?

I really need an NFIP vendor and don't know where to look.

Thanks.

What is wrong with using the MPPP program? You won't have the premium issues with those policies.

Well, now I'm going back on what I said. Maybe I need to find a private policy that is simply more expensive.

Randy, am I correct about the below assumptions on an NFIP policy? NFIP and MPPP are going to be the same, correct?

Unlike private, I have to adhere to the additional MPPP notices? (more administration for me)

Can only have one NFIP policy per structure? (Wouldn't this create issues with scenarios of insufficient coverage)

Requires a 30 day waiting period? (not a huge deal, but still)

Can be difficult to cancel? (how would that work if the borrower later shows duplicate coverage?)

Can require borrower's signature to cancel the NFIP policy?

I really do appreciate your help, because I'm over dealing with this stupid rule.

Unlike private, I have to adhere to the additional MPPP notices? (more administration for me)

The WYO company is responsible for documenting the notifications - who send them is up to you and the WYO company.

Can only have one NFIP policy per structure? (Wouldn't this create issues with scenarios of insufficient coverage)

The loan would be in default, call the loan.

Requires a 30 day waiting period? (not a huge deal, but still)

Force place on the day of expiration of the NFIP policy, the lender is covered for an extra 30 days anyway.

Can be difficult to cancel? (how would that work if the borrower later shows duplicate coverage?)

Should not be, but you need to talk to your WYO that you select.

Can require borrower's signature to cancel the NFIP policy?

Only the lender can cancel the MPPP policy.

http://www.fema.gov/media-library-data/1...ents_2015FY.pdf

Oh, and the premiums are about 3 times the normal premium amounts since MPPPs are rated at the highest possible rate for the area.

Thanks again for the info. If someone can chime in and let me know who they use that would be helpful. Randy, I'm looking for a company that would have a solid online interface to produce notices and track the insurance. My vendor now has a pretty good interface and I receive my 45 day notice automatically after placing a policy. If I have to mess with the additional MPPP notices, I don't want to be the one tracking them. I'm also able to cancel a policy at the click of a button, and receive a refund for unearned premiums automatically.

IF, I can find a vendor who can accomplish all of this, then I may be inclined to move. As for "calling the loan", it just isn't going to happen at a community bank. We tend to bend too far (imho, and obviously yours too) to help borrowers.

Helping borrowers is a two way street. The bank did its part by giving the borrower your depositor's money. They in turn agreed to insure their collateral.

It is not a bend in my book. If they can't afford insurance, they can't afford the loan and you are just postponing the inevitable. If they are just lazy, a demand letter might fix that problem.

You need to send the FP notifications each year, just as if you were first force-placing. We have one-such customer. The FDIC was fine with how we handle it, though it caught them off guard at first. You must really document the price difference in file too.

If the Force Placed Flood Policy is escrowed per the customers request because of the $1500 savings do we still send Force place notification each year?

Yes.