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#1975044 - 11/07/14 03:01 PM Flood Insurance cancellation-yes or no?
Bec Offline
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Bec
Joined: Jul 2010
Posts: 1,115
The Great White North
Interesting situation that I am teetering and tottering with. We have acquired a customer who refinanced their mortgage with us from a different institution. We did our flood determination and it came back that the property was NOT in a flood zone. I have just received a letter from the customer's flood insurance carrier requesting that we send a letter to cancel the customer's flood insurance. The letter specifically states that we have to include in the letter that at one time we required flood insurance and now do not require it.

My question is, if the other financial institution had a determination that indicated the structure was in a flood zone do we have a discrepancy where we would have to take the more conservative approach? I had our 3rd party determination company recheck to be sure of their findings and they remain firm in their position that the property is not in a flood zone. If I can go with our determination, how to I frame the letter? We never required the insurance.
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Flood Compliance
#1975110 - 11/07/14 04:00 PM Re: Flood Insurance cancellation-yes or no? Bec
Dan Persfull Offline
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Dan Persfull
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Bloomington, IN
You are the one ultimately responsible for the accuracy of the determination. You should go to FEMA's Web site and review the flood map yourself for verification if you have any doubt.

If you never required the flood insurance send a short letter to the insurance agent that you never required the flood insurance and they need to contact the previous lender.
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#1975117 - 11/07/14 04:02 PM Re: Flood Insurance cancellation-yes or no? Bec
rlcarey Online
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rlcarey
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Galveston, TX
I have just received a letter from the customer's flood insurance carrier requesting that we send a letter to cancel the customer's flood insurance.

That is ridiculous. The bank should not be involved. It is the borrower's decision and choice whether or not a piece of property has insurance. If you require insurance, the borrower should have been informed. What happens to any current policies of the borrower is none of the bank's concern.

If the bank sends a letter to the insurance agent telling them to cancel the insurance and the property floods - get out your checkbook.
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The opinions expressed here should not be construed to be those of my employer: PPDocs.com

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#1975241 - 11/07/14 06:48 PM Re: Flood Insurance cancellation-yes or no? Bec
Bec Offline
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Bec
Joined: Jul 2010
Posts: 1,115
The Great White North
Thank you both for your responses. I did look at the flood maps and I thought it looked like the home was in a flood zone. I had my determination company look at it again and they certified that it wasn't. I thank you for you comments on the letter to insurance. It does seem absurd that we would have to write a letter asking them to cancel something we never required in the first place.

Thanks again!!!
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#1975262 - 11/07/14 07:16 PM Re: Flood Insurance cancellation-yes or no? Bec
Dan Persfull Offline
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Dan Persfull
Joined: Aug 2002
Posts: 47,517
Bloomington, IN
Under the cancellation rules for the borrower to get a refund of premiums the insurance company must have a letter from the lender requiring the insurance that the insurance is no longer required by them. I would suspect since the property is no longer mapped in a SFHA the borrower is trying to get a refund of the premium.


8. Policy Not Required by Mortgagee.
(TRRP reason 50)
This provides a means to cancel a policy
when coverage was required by the
mortgagee for a closing and it was later
determined that the property was not
located in a Special Flood Hazard Area
(SFHA). As a result, coverage was not
required by the mortgagee. The
mortgageeā€™s statement to this effect must
be attached to the Cancellation/Nullification
Request Form.
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The opinions expressed are mine and they are not to be taken as legal advice.

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#1975275 - 11/07/14 07:29 PM Re: Flood Insurance cancellation-yes or no? Bec
rlcarey Online
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rlcarey
Joined: Jul 2001
Posts: 83,227
Galveston, TX
That may be true, but the borrower's beef is not with the current lender. How can they write a letter to the insurance agency stating that "coverage was required by the mortgagee for a closing and it was later determined that the property was not located in a Special Flood Hazard Area".

This is not a true statement under the circumstances described.
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The opinions expressed here should not be construed to be those of my employer: PPDocs.com

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#1975335 - 11/07/14 09:01 PM Re: Flood Insurance cancellation-yes or no? Bec
Dan Persfull Offline
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Dan Persfull
Joined: Aug 2002
Posts: 47,517
Bloomington, IN
That's why I suggested they write a short letter to the agent informing them they never required flood insurance and the agent needed to contact the previous lender.
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The opinions expressed are mine and they are not to be taken as legal advice.

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