Skip to content
BOL Conferences
Thread Options
#2229693 - 01/27/20 07:42 PM Continue FP on Charge-off/no foreclosure?
Tater Offline
Platinum Poster
Joined: Jan 2006
Posts: 642
Missouri
A loan with a small balance is being charged off due to delinquency. The collateral property is in SFHA and the bank has force-placed the insurance previously. The balance is so small ($2,300) that the bank will not foreclose on the real property but is leaving the lien on file.

Is the bank required to maintain the force-placed flood insurance policy as long as the lien is in place?

Is there anywhere that discusses this in any handbooks? In the OCC Comptroller's Handbook, there is no reference to this scenario - OREO properties and active loans are discussed.
_________________________
Born once? Die twice.
Born twice? DIE ONCE!

Loan Review, HMDA, ALLL

Opinions are my own and do not reflect any others

Return to Top
Flood Compliance
#2229896 - 01/30/20 12:31 AM Re: Continue FP on Charge-off/no foreclosure? Tater
Wedge Offline
New Poster
Joined: Apr 2015
Posts: 12
The only guidance that I can think of that is related to your situation comes from the FDIC Compliance Examination Manual:

"Other Real Estate Owned— An institution with other real estate owned (OREO) in SFHAs should, as a prudent practice, purchase flood insurance policies on its OREO property, although it is not required to do so by the regulations."

Basically you are not required to maintain flood insurance on the property, but you would have to justify your reasoning for not maintaining flood insurance to your Safety and Soundness examiners.

Return to Top
#2229907 - 01/30/20 02:23 PM Re: Continue FP on Charge-off/no foreclosure? Tater
Tater Offline
Platinum Poster
Joined: Jan 2006
Posts: 642
Missouri
Thanks - that tracks with how we were reading it and trying to figure out which fight we'd rather participate in.
_________________________
Born once? Die twice.
Born twice? DIE ONCE!

Loan Review, HMDA, ALLL

Opinions are my own and do not reflect any others

Return to Top
#2229917 - 01/30/20 03:13 PM Re: Continue FP on Charge-off/no foreclosure? Tater
rlcarey Online
10K Club
rlcarey
Joined: Jul 2001
Posts: 83,226
Galveston, TX
This is not OREO property. Charge-off is an accounting issue. If you maintain the lien on the property, flood insurance is required.
_________________________
The opinions expressed here should not be construed to be those of my employer: PPDocs.com

Return to Top
#2229926 - 01/30/20 03:48 PM Re: Continue FP on Charge-off/no foreclosure? Tater
Adam Witmer Offline
Power Poster
Joined: Sep 2010
Posts: 2,658
I agree with Randy. Flood insurance is still required while you maintain the lien. Now, if and when the property becomes OREO, then you will follow the OCC guidance referenced above.
_________________________
Adam Witmer, CRCM

All statements are my opinion, not those of my employer, and should not be taken as legal advice.
www.compliancecohort.com

Return to Top