Is it a UDAAP issue if we do not reamortize the loan after the force placed premium is added to the loan balance? Can someone direct me to the supporting documentation if so, so that I can take that information to my CO.

Supporting documentation is going to be a little hard to come by. However, a mid-west bank that I worked for settled out of court on a class action lawsuit on force placed insurance on vehicles for doing the same thing in the 90's.

Take this scenario. Joe gets a $75,000 7.5% mortgage loan and lets his insurance lapse after the first year. The bank starts force placing insurance without re-amortizing the loan and the premiums run $1,200 a year. Fifteen years go by and the 15 year mortgage matures. Joe thinks his mortgage is paid off as he did not really realize what those letters you sent him actually meant and finds out he still owes the bank $30,000.

Try standing in front of a judge and explaining that what you did was not unfair and deceptive.

If the dollar amounts and terms are different, say for example this was a 30 year mortgage instead of a 15 year mortgage - Joe would owe the bank $85,000 ($10,000 more than he borrowed) at the end of fifteen years of making his normal mortgage payments.

Is adding the force placed premium to the loan balance and reamortizing the only option the institution has?

Your options are limited to your loan agreement and State law.

You can bill them separately for the insurance, which means collecting separately. Everything has a downside.

Thanks for the responses.