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#1999435 - 03/03/15 04:59 PM Pay borrower's premium rather than force place
HRH Okie Banker Offline
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Oklahoma
Force placing insurance is extremely high on this property. Is it possible for the bank to pay the premium due on the borrower's policy instead? We are still in the 30 lapse coverage period. Thank you

1 - 4 family property. Premiums not escrowed
Last edited by HRH Okie Banker; 03/03/15 05:12 PM.
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Flood Compliance
#1999444 - 03/03/15 05:20 PM Re: Pay borrower's premium rather than force place HRH Okie Banker
Dan Persfull Online
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Dan Persfull
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Bloomington, IN
Is it possible for the bank to pay the premium due on the borrower's policy instead?

Nothing that I am aware of would prevent you from paying the premium for the borrower. However, IMO you are still force placing the insurance. You are simply force placing it through the borrower's agent instead of your agent and you will need to follow your force placement procedures
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#1999458 - 03/03/15 05:38 PM Re: Pay borrower's premium rather than force place HRH Okie Banker
HRH Okie Banker Offline
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Oklahoma
Excellent and thank you Dan. we have followed forced placed procedures. We just didn't want the customer to have to pay those higher premiums.
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#1999459 - 03/03/15 05:39 PM Re: Pay borrower's premium rather than force place HRH Okie Banker
Kathleen O. Blanchard Offline

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The only problem is that the borrower can cancel that policy and receive a refund of the money the bank paid. You would be right back where you started and out $.
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#1999475 - 03/03/15 06:03 PM Re: Pay borrower's premium rather than force place HRH Okie Banker
Dan Persfull Online
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Dan Persfull
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Bloomington, IN
Kathleen brings up an excellent point and there is no legal way that I'm aware of for you to mandate the insurance company send any unearned premiums to you instead of the borrower in the case they did cancel the policy.
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#1999479 - 03/03/15 06:12 PM Re: Pay borrower's premium rather than force place HRH Okie Banker
HRH Okie Banker Offline
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Oklahoma
Thanks for that info! I remember this now.

We had just been asking each other, here, why everyone doesn't do that and save on the premiums. We have to decide, in this case, if that is a risk we want to take. I say that because the forced placed premiums are much, much higher and we have a very good chance of getting this property into REO.
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#1999566 - 03/03/15 08:48 PM Re: Pay borrower's premium rather than force place HRH Okie Banker
David Dickinson Offline
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David Dickinson
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Central City, NE
You might like to read the article entitled "Flood Insurance Force Placement" at our website:
http://www.bankerscompliance.com/compliance-resources/free-downloads.htm

As Kathleen said, you're taking a risk in that the borrower can cancel that policy and the refund goes to them.

Also, a question for you: The borrower could pay there own premium at a much less premium. The higher premium should be a deterrent for the policy holder/borrower to purchase their own insurance. You have a borrower that has been notified they must have insurance, they don't cooperate and are in violation of the loan contract. Yet you want to save them money and risk them canceling the policy and "stealing" from you? I don't understand.
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#1999590 - 03/03/15 09:22 PM Re: Pay borrower's premium rather than force place HRH Okie Banker
HRH Okie Banker Offline
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Oklahoma
This customer is recently paying 9/30 and 1/60 days late. Customer will not return any calls or answer any letters. I would guess that we are going to see a very hefty loss on this transaction, which would have included the forced placed insurance premiums. A "deterrent" is not the issue right now. Minimizing our loss is. The chance of a loss is greater than the risk.
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#1999623 - 03/03/15 10:35 PM Re: Pay borrower's premium rather than force place HRH Okie Banker
Kathleen O. Blanchard Offline

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Have you checked into providing the old policy underwriting to the forced placement company so that they can properly determine risk? The higher forced placement premium is generally because they are insuring unknown risk. It is possible to get a more reasonable rate if you can provide the needed info.
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#1999627 - 03/03/15 10:51 PM Re: Pay borrower's premium rather than force place HRH Okie Banker
rlcarey Offline
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rlcarey
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Galveston, TX
Paying the renewal of flood policy after the payment is due is not as easy as it once was. It could very well involve having to get an elevation certificate, etc. It is a bad way to go. They are late, they are never going to catch up - force place your normal policy as they are being uncooperative.

I have little patience for people that don't at least make an effort.
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#1999638 - 03/03/15 11:26 PM Re: Pay borrower's premium rather than force place HRH Okie Banker
HRH Okie Banker Offline
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Oklahoma
KD - great idea. I didn't know about that. I will check on that.

Randy - I have to agree with your on the effort part. At this point I want to minimize what I think will be a significant loss.

Thanks everyone. Good discussion and I bet others have been interested in it too.
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#1999675 - 03/04/15 02:54 PM Re: Pay borrower's premium rather than force place HRH Okie Banker
Combustible Offline
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Couldn't this cause some negative Fair Lending results also?

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#1999682 - 03/04/15 03:23 PM Re: Pay borrower's premium rather than force place Combustible
Kathleen O. Blanchard Offline

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Kathleen O. Blanchard
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Originally Posted By: So so
Couldn't this cause some negative Fair Lending results also?


Yes, it could if the bank was not consistent in how customers were treated.
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Kathleen O. Blanchard, CRCM "Kaybee"
HMDA/CRA Training/Consulting/Mapping
The HMDA Academy
www.kaybeescomplianceinsights.com

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