Our long-standing practice when force-placing hazard insurance due to expired or lapsed policies was to only insure for the outstanding balance of our loan. The vendor that we use for forced-placed policies is telling us that industry practice has moved toward the lender insuring for the last known coverage amount that the borrower had in place. The vendor claims that lenders face litigation from the borrower should he experience a loss and the home wasn't covered by a policy in an amount closest to the replacement value of the home. He also claims the CFPB has been looking at this issue and may be taking action in the near future. Just wondering what others' are doing in this regard, force-placing in an amount to cover just the outstanding loan balance or last known coverage amount on the home?

Stick with the law and regulation rather than what a "vendor claims" especially when they are selling the insurance.

Ya, that was our thought too - might have to take it with a grain of salt considering he's selling policies....
Thanks Randy

The borrower doesn't purchase their own insurance (even though it's a requirement of the loan and required by law) and the borrower is going to sue you? Uhh, no.


Your vendor must have a crystal ball that the rest of us have never seen. I feel like I'm pretty up on the industry when it comes to flood insurance. I've never heard of either of these.

We want to force place on a loan that is on non-accrual and has racked up numerous late charges & attorney fees. Can we force place for the current principal balance including all of the non-accrued interest, late charges and attorney fees or principal balance only? Thank you.

You have to cover the loan amount. If those fees are now considered the loan amount, you have to cover them all.

Thanks Randy

Does RESPA stipulate anywhere what amount is required? I don't see that it does. I don't see any requirement to even cover the loan amount. It seems to imply you use whatever insurance coverage is required by the terms of the loan agreement.

Hazard insurance is generally a safety and soundness issue.

Visiting this topic again. Commercial Loan. Non-Accrual. Need to force place hazard insurance. If the value of the property exceeds the balance of the loan do we use the book balance or the customer's balance to deteremine amount of insurance. Insurance premiums are added to the principal but legal fees are not. Do we cover for book balance that includes insurance premiums or customer balance. Thanks,

You would cover whatever they are legally obligated to pay you under the note and security agreement.