We changed to a different force place flood insurance company- we refunded part of the premium to the borrower on the old insurance company and charged the premium to the borower from the new insurance company. When we charged the premium on the new insurance company should we have given the borrower 45 days to get their own flood insurance before charging them? It was not for a full year when we switched - it from the date we canceled the old and put them on the new company- I'm doing a review of force placed flood and I can't find anything on it but I feel like we should have given them the 45 days. Thanks.

You mean you are giving them a refund - correct? Otherwise, the bank should be absorbing the additional costs as I would place this high on a UDAAP list.

Our force placed flood borrowers are forced placed adding the premium to their principal balance. Canceling the old policy was not done on their renewal date (12 mos) so the refund was deduction on their princ balance.

Yes the borrowers got refunded.

If all you did was refund the different between policies because your new provider was cheaper - why the question: "When we charged the premium on the new insurance company" ?

What charge are you talking about.

I'm talking about this:

Borrower's flood insurance was from 11/5/13 to 11/5/14
We canceled the old insurance company on 6/2/14-
We issued a flood policy on new company from 6/2/14 to 11/5/14
refund was given on old -
we charged a premium from 6/2/14 to 11/5/14 on new company.

Why???

I'm talking about this:

You refund $100 for the old policy
You charge $125 for the new policy
You have a UDAAP in my mind. It is not the borrower's fault that you decided to change insurance companies.

Or the old policy refund was $125 and the new policy was $100 - you just refund the borrower $25 and move on - why all the accounting entries???

A little late to thank you but I was off for a couple of days. I plan on reviewing that from what you said, again. I appreciate your answers. Thank you.

IMO,yes, you should have simply gone through the 45 day cycle on the borrower because technically you force placed without the proper notification.

I do not see any issue with your premium charges since it appears you refunded the unearned premium from the old policy you cancelled, and then placed a policy with the new company and charged the borrower for that.......

I'm not sure the 45 day notice would be required as the policy that was to last a year, will last a year, the vendor providing the coverage changed in the middle, however. I'm a little surprised the policies didn't just run their course with the new vendor picking up new policies.

I share Randy's concerns if the premiums increased and this cost was passed on to the borrower. Switching in the middle to a more expensive premium doesn't make sense.

Yes, thanks Midwestriver- I agree- the borrowers should have been notified first. I believe they wanted to show the refund on the borrower's loan account and show the new policy amount also. The new force placed company is not an increase the borrower's premiums.

They would have created less problems if they had let the policies run their course and had the new vendor pick up the new policies.

I've written up my review and talked with those involved and documented my findings to management.
Thanks!