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#2181953 - 06/15/18 04:35 PM Lender erronesouly charged for Flood Insurance
Parrot Mama Offline
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Joined: May 2008
Posts: 86
I have a question that relates to a secondary market loan: I am asking for an employee in my department.

At closing the buyer/borrower was told they had to pay flood insurance (was never told this until at closing!) The borrower called the Lender and they said they were NOT escrowing for flood insurance, After he sent them his disclosure they said, oh, I guess we are.

After research, it was discovered that the property IS NOT in a flood zone and the borrower requested a refund of the premium. The insurance company sent the refund to the lender instead of to the borrower. The borrower is STILL being charged for escrow of flood insurance and the lender refuses to do an analysis and return money that was charged and continues to be charged on a service that is no longer valid and was never required. The lender says the borrower will have wait until next April because they want to hold the money for the flood insurance and continue to charge him escrow for it (although he no longer has it!) in case his homeowners premium goes up next year. Does the borrower have any rights in this matter to require the lender to do an analysis and refund premiums that were not required in the first place?

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RESPA
#2181971 - 06/15/18 06:00 PM Re: Lender erronesouly charged for Flood Insurance Parrot Mama
rlcarey Online
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rlcarey
Joined: Jul 2001
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Galveston, TX
Outside of suing the both of you - probably not.
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#2182086 - 06/18/18 03:46 PM Re: Lender erronesouly charged for Flood Insurance rlcarey
Parrot Mama Offline
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Joined: May 2008
Posts: 86
I'm not sure I understand "suing the both of you"?

The loan was not originated by my institution. My employee is the borrower and another institution is the lender. I assume you mean the only thing the borrower can do is sue the lender and the broker?

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#2182212 - 06/19/18 01:29 AM Re: Lender erronesouly charged for Flood Insurance Parrot Mama
Truffle Royale Offline

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you might give the employee the citation from TRID regarding correcting an error within 60 days of closing.

I would tell the employee to write a letter to the President of the bank where their loan is. If that doesn't shake the LO up enough to release ALL of their flood premiums, then follow it up with a visit to an attorney.

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#2182304 - 06/19/18 04:34 PM Re: Lender erronesouly charged for Flood Insurance Parrot Mama
Dan Persfull Offline
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Dan Persfull
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Posts: 46,762
Bloomington, IN
At closing the buyer/borrower was told they had to pay flood insurance (was never told this until at closing!)

When your friend writes their attorney and the President of the Bank have them enclose the following citations along with the CMP for violations:

https://www.fdic.gov/regulations/laws/rules/2000-6100.html#fdic2000part339.9

Make sure they include all correspondence to the bank in their complaint to the CFPB and the bank's primary regulator, especially the 339.9 violation.
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#2182319 - 06/19/18 05:35 PM Re: Lender erronesouly charged for Flood Insurance Parrot Mama
ACBbank Online
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Joined: Jul 2006
Posts: 4,169
New York City
Before you get attorney's involved, is your friend talking to some junior person or someone who can actually make a decision? More often than the general public speaks to a resource who isn't authorized to facilitate these types of requests. If that's not the case, I would follow Dan's advice.
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#2182395 - 06/19/18 11:26 PM Re: Lender erronesouly charged for Flood Insurance Parrot Mama
Reg Warrior Online
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Besides having issues with TRID/Reg. Z and Flood Insurance violations, RESPA indicates that the escrow cushion cannot be greater than 1/6 of the total estimated annual escrow disbursements. You will also need to check your state law for their limit of the escrow cushion.

The lender is digging themselves a mighty big hole!

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