When a borrower is not providing collateral insurance and we are required to force place, the premium is added to the principal balance. This is clearly outlined in our Agreement to Provide Insurance. However, we have found mistakes during this process and the force-placed premium had to be reversed. I have concerns regarding consumer harm and UDAAP, since the borrower paid interest on the increased principal amount. Is it a standard practice to add force-placed premiums to the principal balance?

If you do and you make a mistake, then the reversal transaction would be backdated to the original force placement and date and subsequent transaction would then be reapplied.

Is the "Agreement to provide insurance" a required document for HELOCs?

What "Agreement to provide insurance" are you referring too? You mean to keep the property insured? That is a lender option and any specific disclosure would be a State law issue.

Yes, it is a document provided by the software company. It is covered in the loan agreement so making the decision on whether it needed its own separate document. Thank you!