Escrow & force place insurance

We recently closed a loan in March that required escrow. The customer provided an insurance policy that was in force. When the loan closed, I mailed the insurance company a check for the premium out of the escrow initial deposit. We received a call today that due to underwriting guidelines, they couldn't write the policy and are returning the check. I will place this back in the customers escrow account. My question is,
I know I can force place insurance on the loan but can I pay for the premium out of his escrow account?

A 45 day notice must be sent to the customer stating that they do not have coverage or it is inadequate, and if the borrower does not obtain the insurance within the 45-day period, the lender will purchase the insurance on behalf of the borrower and may charge the borrower for the cost of premiums and fees to obtain the coverage. The Act does not permit a lender or its servicer to send the required 45-day notice to the borrower prior to making a determination that flood insurance coverage is no longer in force or inadequate." If the borrower does not obtain the required coverage within the 45 days then by law you are required to force place the coverage, and you may charge the customer at this time. There is no extra allowable time.

Bankaholic, I believe Dianna is speaking of regular insurance...not flood, which carries it's own set of rules.

Dianna, at this point and prior to the new servicing rules on FP insurance...my opinion would be that it may depend on whether the FP insurance covers the borrowers interest or just your FI's. If the latter, I'd tread very carefully.

I believe putting this in the regular lending forum where you will get views by many people who have escrow experience would be beneficial. I know of no GA specific laws regarding this.