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#2257664 - 08/04/21 04:23 PM Failure to obtain Flood ins
Comply101 Offline
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Joined: Nov 2013
Posts: 19
We had an unfortunate incident occur recently. After we had already closed a mortgage loan it was noticed that the Flood Cert had the incorrect address. (It is part of the UW process to review this but unfortunately this was missed.) A new flood cert was obtained and the property came back in the flood zone. Unfortunately we closed our loan without having obtained a Flood Hazard notice and without obtaining flood insurance. I know these are both violations. Do you have any guidance on how we should handle this situation going forward? I feel like we should have the notice signed by the borrower now and require them to obtain the flood insurance coverage. Should we also provide a corrected CD and escrow notice disclosing the escrow for flood ins?

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Flood Compliance
#2257668 - 08/04/21 05:12 PM Re: Failure to obtain Flood ins Comply101
rlcarey Offline
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rlcarey
Joined: Jul 2001
Posts: 77,247
Galveston, TX
Send them the notice via certified mail along with your 45 day notice to purchase flood insurance so you do not have to worry about them returning a signed copy . You might want to include an apology letter also. smile

This is a post closing event that does not impact closing costs. You would need to issue a short year escrow statement revising their escrow account payment once you get a policy from them. Whether you want to force place now or after the 45 day letter expires is up to you.
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#2257670 - 08/04/21 05:22 PM Re: Failure to obtain Flood ins Comply101
Skittles Offline
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Skittles
Joined: Sep 2002
Posts: 13,958
TN
This sounds like a training 'opportunity'.

You may want to make everyone aware that you have, at minimum, three flood violations with this loan: 1) incorrect flood determination; 2) notice not received and acknowledged by the borrower prior to loan origination; and 3) failure to have proper flood insurance in place prior to loan origination.
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#2257804 - 08/06/21 06:33 PM Re: Failure to obtain Flood ins Comply101
Dan Persfull Offline
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Dan Persfull
Joined: Aug 2002
Posts: 46,417
Bloomington, IN
You may want to make everyone aware that you have at minimum, three flood violations with this loan - that is a pontental $6,756 CMP for this one loan.
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The opinions expressed are mine and they are not to be taken as legal advice.

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