Just read the Jan/Feb 2019 ABA Bank Compliance Magazine...page 38 had a Q&A on flood force placement and states that if a force placed policy is about to expire, the lender just can renew it and the regulation does not require additional notification to the borrower when force placed insurance is due for renewal. The lender, at its discretion, may notify the borrower that the lender is planning on, or has, renewed the force placed policy. They cite the 2015 Outlook Live Interagency Flood Insurance Regulation Update. Link below to transcript of that update, page 14, question 10.

https://consumercomplianceoutlook.org/assets/outlook-live/2015/102215-transcript.pdf?la=en

This goes against what I believed to be the requirement, which was...when a force placed policy was expiring, upon expiration, send out a 45 day letter to the borrower. We could renew or force place a new policy on day 1 (and have option to charge on day 1) but still had to follow the 45 day notice requirements (and also the refund of overlap of premiums if the borrower provided their own policy).

Thoughts? Anyone actually have any feedback from regulators on this?

Thanks.

The Q&A on page 14 (Q #10) says you do not have ADDITIONAL notification requirements. It also is discussing notification PRIOR to renewal. There are no notifications due prior to renewal. That's what they are clarifying. I agree this is poorly worded, but I don't think it says you don't have to still notify once the insurance expires.

This is how it is presented in the ABA Bank Compliance Magazine (Jan/Feb 2019 edition). I think there is a definite disconnect.

Q - A force-placed flood insurance policy on one of my bank's portfolio loans is nearing expiration. Must the bank restart the force placement process and send out a notice after the policy expires, or may the bank just renew the force-placed policy?

A - The bank may simply renew the force-placed policy. No notice is required if the force-placed policy is already in place. The agencies addressed this situation in tl1eir webinar, entitled "2015 Outlook Live Interagency Flood insurance Regulation Update" (consumercomplianceoutlookorg/ outlook-live/archives/). Question 10 in the webinar asked what process the lender should use to renew force-placed flood insurance if a borrower's force-placed flood insurance is about to expire. The response explains that the regulation requires the lender to notify the borrower if the lender "determines at any time during the term of the designated loan that the building or mobile home and any personal property securing the designated loan, is not covered by flood insurance, or is covered by flood insurance in an amount less than required:' In this scenario, the force-placed policy is about to expire-it has not yet lapsed so the property is still covered by flood insurance. Thus, the regulation does not require additional notification to the borrower when force-placed insurance is due for renewal. When the lender is notified that the force-placed flood insurance policy is about to expire, the lender should follow its normal communication practices with its insurance provider to renew the flood insurance policy to ensure that flood insurance coverage remains in place. The lender, at its discretion, may notify borrowers that the lender is planning to renew or has renewed the force placed policy to encourage borrowers to seek their own policy which may be available for a lower premium amount. (Response Provided 1112018.)

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This is how it was presented in the 2015 Consumer Compliance Outlook webinar that ABA is citing:

QUESTION 10 – IF A BORROWER’S FORCE-PLACED FLOOD INSURANCE IS ABOUT TO EXPIRE, WHAT PROCESS DOES THE LENDER NEED TO USE TO RENEW THE FORCE-PLACED FLOOD INSURANCE COVERAGE?

Alex, since you handled the force-placed portion of our presentation, would you be willing to handle this question?

Alex Cheng:
I’d be happy to. So, the regulations covering force placement practices require the lender to notify the borrower if the lender, and I quote, “determines at any time during the term of the designated loan that the building or mobile home and any personal property securing the designated loan, is not covered by flood insurance, or is covered by flood insurance in an amount less than required.” So, in this scenario, the force-placed policy is only about to expire, and has not yet lapsed. So, the property is still sufficiently covered by flood insurance. The text of the regulations does not require additional notification to the borrower when force-placed insurance is due for renewal. When the lender is notified that the force-placed flood insurance policy is about to expire, the lender should follow its normal communication practices with its insurance provider to renew the flood insurance policy on the and contact information for the insurance company or its agent. In the preamble to the rule, the Agencies have declined to require additional information be included on the declarations page in order to be accepted. Although there’s no discussion of renewals in the rule, a policy declarations page that includes the existing flood insurance policy number and the identity of and contact information for the insurance company or its agent would be sufficient. It also would be acceptable, although not required by the rule, to follow FEMA Bulletin W-13013, as referenced in footnote [69] of the Final Rule2, and that FEMA bulletin discusses the acceptable forms of evidence of insurance.

I don't agree with the ABA's response in the Jan/Feb 2019 Compliance Magazine. I also don't think that's what the Consumer Compliance Outlook webinar was addressing. I emailed Mark Kruhm with the ABA and asked him to look into this.

Thanks David.

I just talked with Mark Kruhm at the ABA. The ABA stands by the Q&A they released in the Jan/Feb Compliance Magazine. "Thus, the regulation does not require additional notification to the borrower when force-placed insurance is due for renewal." Mark said this is open to interpretation, but they are relying on the 2015 Consumer Compliance Outlook webinar information and there's nothing in the Act, regulation or any FAQs that contradicts this.

I should add: Mark added it may be a good idea to notify each time, but it isn't a regulatory requirement. I'm also interested in seeing how field examiners are interpreting this.

Thanks David for following up on this...I am interested as well how field examiners are interpreting it.

Wondering if minds ever changed on this topic, but, for what it is worth I totally agree with @David. The expiration of one force placed policy should result in a new force placed process, similar to what was done with the initial force placement in my book.

Well, the proposed Flood FAQs say this:

"FORCE PLACEMENT 14. If a borrower’s force-placed flood insurance expires, is the lender required to send a force-placement notification to the borrower prior to renewing the force-placed flood insurance coverage?
No. The Regulation does not require the lender to send a notice to the borrower prior to renewing a force-placed policy. However, the lender or its servicer, at its discretion, may notify the borrower that the lender is planning to renew or has renewed the force-placed policy. Such a notification may encourage the borrower to purchase his or her own policy, which may be available for a lower premium amount.

Ah, so they addressed this in the new proposals. Cool. Thanks, Adam. I haven't got around to reading all those yet. They made some interesting changes with the construction loans, I did see that.