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#2100117 - 09/23/16 03:39 PM HELOC renewal; newly mapped into SFHA
Lilly2pet Offline
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Joined: Feb 2014
Posts: 150
Land of Pine Trees and Lobster...

First mortgage and 2nd lien HELOC issued to borrower several years ago; not in a flood zone. HELOC is now up for renewal, new flood determination pulled, indicated property is now in a flood zone (county recently remapped and we do not subscribe to Life of Loan determinations).

Do I need to send both a flood notice and a 45 day forced place or just the 45 day forced place letter?
Can we use a forced place for the HELOC renewal? My thought is if we get to that point, we would have to adverse action the HELOC, freeze the line and then rely on the forced place policy.

Am I missing anything??

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Flood Compliance
#2100145 - 09/23/16 05:09 PM Re: HELOC renewal; newly mapped into SFHA Lilly2pet
TMatt87 Offline
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TMatt87
Joined: May 2011
Posts: 1,984
Idaho
You must send the notice and the force place letter.

The rule was always that you couldn't close a loan using force placed insurance (even a renewal). However, there was a presenter on a government webinar a while ago (maybe a year?) that said closing on force placed insurance was allowed. There was quite an uproar about that statement. We still don't allow it, and in this situation, would call the loan due at original maturity.
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#2100146 - 09/23/16 05:13 PM Re: HELOC renewal; newly mapped into SFHA Lilly2pet
Lilly2pet Offline
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Joined: Feb 2014
Posts: 150
Land of Pine Trees and Lobster...
Thank you TMatt87.

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#2100186 - 09/23/16 07:32 PM Re: HELOC renewal; newly mapped into SFHA Lilly2pet
Dani York, CRCM Offline
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Dani York, CRCM
Joined: Apr 2005
Posts: 3,663
TN
The way we treat it and the way our FDIC examiners have explained it to me, is that you cannot forceplace the insurance to make the loan. On a renewal, if the forceplaced policy was ALREADY in effect, we could close using that policy.

In the situation you are describing, we would deliver the flood notice and the 45-day letter. We would run through the forceplacement process to get a policy on the property, BUT we would delay closing until the borrower produced their own policy.

In your case, you do not already have a forceplaced policy in effect. You have a new MIRE event which requires you to notify the borrower that they need to get flood insurance. They now have a choice to get the policy to close the renewal, pay the loan off, or default on the loan.
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#2100203 - 09/23/16 08:10 PM Re: HELOC renewal; newly mapped into SFHA Lilly2pet
Lilly2pet Offline
100 Club
Joined: Feb 2014
Posts: 150
Land of Pine Trees and Lobster...
Thank you Dani

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#2100212 - 09/23/16 08:21 PM Re: HELOC renewal; newly mapped into SFHA Lilly2pet
rlcarey Offline
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rlcarey
Joined: Jul 2001
Posts: 83,227
Galveston, TX
And they have to get insurance to cover both loans at this point.
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#2100632 - 09/27/16 07:34 PM Re: HELOC renewal; newly mapped into SFHA Lilly2pet
Dan Persfull Online
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Dan Persfull
Joined: Aug 2002
Posts: 47,517
Bloomington, IN
FWIW, we operate the same as Dani and we also received the same opinion from the FDIC.
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The opinions expressed are mine and they are not to be taken as legal advice.

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