We have an established escrow account for homeowner's insurance for a borrower. We were notified by insurance agency that coverage would not be renewed and communicated this to our borrower, but they did not obtain coverage. Do we need to wait the 45 days to charge the customer to force place or can we take it from escrow before the 45 days?

What was the reason for non-renewal?

You have to start the FP letter process.

You can obtain a FP policy on day one, but you cannot charge the borrower(borrower's account)until 45 days following initial notice.

We had one that almost came down the wire. We got a letter from the current insurance that was paid in full for the whole year. Went something like this -- " We made a surprise post purchase inspection of your home. We noticed that you have significant property damage to the exterior/the roof...... it appears you do not have a working kitchen sink... ""

FYI these were foreclosed homes purchased for improvement that the owners were renovating prior to them moving in and the insurance agent WAS aware of this at the time the policies were paid for ---

The owners had to have the repairs completed and inspected by the insurance company prior to the insurance companies cancellation date, and we came close to having to forceplace.

I've also had a FEMA flood insurance policy cancel (due to flood damage) that was escrowed and we came close to having to charge the escrow for force place on that too.

This and I only about 100 loans with escrow.

I've also had a FEMA flood insurance policy cancel (due to flood damage)...


Huh??

I've read that in any event when funds are disbursed from escrow to pay the insurance premium, the insurance is not force-placed and the rules for force-placed insurance do not apply. Even if it's a lender purchased policy. Not true?

Read where??

https://www.trinovus.com/2014/02/05/new-respa-rules-for-force-placed-hazard-insurance/


Article is a year old, so it may not be accurate.

"In that event, the lender would either have to pay the higher premium or place the insurance with an insurer that will cover the hazard, again with funds from the escrow account. In any event, when the funds are disbursed from the escrow to pay the premium, the insurance is not force-placed and the rules for force-placed insurance do not apply."

I agree with the first part, but if the lender and not the borrower places the insurance with another insurer, explain to me how that is not force placed insurance?? Even the small servicer exemption indicates:

(iii) Small servicers. Notwithstanding paragraphs (k)(5)(i) and (k)(5)(ii)(B) of this section and subject to the requirements in § 1024.37,........

1024.37 are the force placed insurance rules.

I think their blog post is wrong.

May very well be wrong. Thankfully we have BOL to keep us all straight!