In reviewing some insurance policies it was identified that some flood policies were not dated the same date of closing. The flood policies ranged from 7 - 14 days after closing. What is happening is that the Title Company is delaying the checks from being sent out or the Insurance Company is not getting to the policy in a timely fashion (I'm sure there is another dozen possibilities).

My concern is that:
Section A.d. states that "A designated loan must have flood insurance as a condition of closing".

Since the policy is not dated the same date of closing or dated prior to the closing day. I'm I out of compliance? If so, how are other companies assuring the policies are dated correctly? We are seeing if our GAP policy will cover it but is that an allowable option?

The effective date of the policy should be on or prior to closing. A borrower can tell an insurance company the effective date of coverage.

The policies require payment prior to loan origination.

What is happening is that the Title Company is delaying the checks from being sent out or the Insurance Company is not getting to the policy in a timely fashion (I'm sure there is another dozen possibilities).

This is why you must have a policy in place at or before closing.

The following thread has links to previous discussion about paying the premium at closing. Your scenario is a perfect example why it shouldn't be allowed.

Click here

You can also do a search using +flood +premium +closing as the search term and you will find several more discussions.

Banks must establish a process to protect the bank. This would include requiring evidence of adequate insurance prior to closing so that the amount of insurance and zone used to underwrite the insurance can be reviewed PRIOR to the loan closing and any problems resolved. The review can be complicated and time consuming and should include steps like checking appraisals for additional structures that must be insured.

Any problems that come to light after closing are violations. With the penalty now at $2,000 per violation, strong processes to protect the bank are even more important.

Don't wait until closing to obtain evidence of insurance if you want to have a strong process and avoid penalties.

Look at pages GR 8 and 9 of the Flood Insurance Manual (for agents.)If the premium is paid with loan closing funds it sounds to me like it's up to the settlement agent to send the premium in a timely manner (29 days) or am I misunderstanding the question?

2. New Policy – No Waiting Period (Loan Transaction)Flood insurance that is initially purchased in connection with the making, increasing, extending,or renewal of a loan shall be effective at the time of loan closing, provided that the policy is applied for at or before closing. Use the rules below to determine the effective date.
a. Premium payment from the escrow account (lender’s check), title company, or settlement attorney is considered made at closing if the check is received by the writing company within 30 days of the closing date (closing date plus 29 days) and the Application is dated on or before the closing date. If received after 30 days, the effective date is the receipt date regardless of the flood zone.

Oh yes, that is all in the flood insurance manual. However, it is the bank's responsibility under the regulations to ensure that the property is covered by insurance at the time of closing.

So the question is, "do you feel lucky"? Sorry - the Clint Eastwood quote just popped into my mind.

It boils down to: do you as the bank want to risk a $2,000 fine on the fact that the title company and insurance agent are both going to act in a timely manner when they don't have any skin in the game.

You are making the loan so therefor, he who owns the gold makes the rules.

As was pointed out in previous threads that outlines to the agents when the policy is affective upon receipt of payment of the premium by the NFIP from the agent.

If the premium is paid with loan closing funds it sounds to me like it's up to the settlement agent to send the premium in a timely manner

In the above case it is plain the settlement agent did not present the premium in a timely manner and as Randy points out they have no skin in the game. The FI closed a loan without proof of flood insurance. They are facing a $2,000 CMP, not the title company.

Bottom line it is the FI responsibility to have proof of a flood policy in place with an effective date on or before the closing date. The responsibility lies with no one else and the FI will be the one assessed the penalties for non compliance.

Sorry, when I clicked on the previous thread, I was denied access. I guess I live in that theoretical world where we (banks, bankers, and settlement agents) work and play well together.

Sorry Bville, I didn't pay attention when I posted the above link and it is a link to a Q&A in the Gurus Forum. Here are the referenced links that were posted in that thread.

http://www.bankersonline.com/forum/ubbthreads.php?ubb=showflat&Number=1699299&page=1

http://www.bankersonline.com/forum/ubbthreads.php?ubb=showflat&Number=1592396#Post1592396

It should be enforced that insurance companies must provide the flood zone risk used to issue the policy. We are getting flood coverage at closing, but 98% of the time the companies are not including the flood zone used when issuing the policy.

When you wait until closing, you have no time to review and address issues re zones or amounts of insurance, covered buildings, etc.

but 98% of the time the companies are not including the flood zone used when issuing the policy

We wont' accept the policy or dec page if it does not identify the zone. The zone must be identified on the application so there is no reason for it not to be shown.

BTW, as I've stated in the past, we don't deal with the agent. We tell the borrower this is what we need and until their agent complies we can't give them their money. You'd be surprised how quick an agent will change their attitude when having to deal with their client telling them hey I can't get my money because you won't do this.