Who is the insured on force-placed policies??????

The insurance company through which we forceplace flood insurance began to name the customer as the insured and the bank as mortagee a few months ago. Prior to this change, the bank was named as insured.
The company indicates that this is part of the changes made to the NFIP under Obama in July.
Is anyone aware of this change?

I don't think it's anything new...it's always supposed to have benefited the borrower.

Not new. Maybe they just figured it out.

I'm befuddled (is that a word?) We have always told our customers that the force-placed insurance benefits the bank. In the case of a loss, the funds come to us to payoff the mortgage.

So was there anything new on this in 2012?

The regulation states that the the lender or its servicer shall purchase insurance on the borrower’s behalf if the borrower fails to obtain flood insurance within 45 days after notification.

The funds benefit the borrower (just like car insurance or other hazard insurance)....to repair, rebuild the property. Since the bank is the loss payee, more than likely, the funds will come in the form of a check payable to the borrower AND the lender so that the bank can control that the funds are actually spent to rebuild the collateral.

I'm talking off the top of my head though....didn't look anything up.

No, except the upcoming changes that have not been put into regulation format yet.

Now, I will say I'm not familiar at all with MPPP force-placement, so if that's what you have, someone more familiar may have info I wouldn't know about.

We insure in borrower's name with us as lienholder.

FDIC version:
§ 339.7 Forced placement of flood insurance.
If a bank, or a servicer acting on behalf of the bank, determines, at any time during the term of a 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 the amount required under § 339.3, then the bank or its servicer shall notify the borrower that the borrower should obtain flood insurance, at the borrower's expense, in an amount at least equal to the amount required under § 339.3, for the remaining term of the loan. If the borrower fails to obtain flood insurance within 45 days after notification, then the bank or its servicer shall purchase insurance on the borrower's behalf. The bank or its servicer may charge the borrower for the cost of premiums and fees incurred in purchasing the insurance.

We have a grand total of 3 loans in our entire portfolio that are in a flood zone and 1 of those is not even in a participating community. So, needless to say we don't have much experience with flood insurance. We do have one loan however, that the flood insurance has expired. We have mailed the notice and have waited our 45 days. My question is, can we simply pay the premium on the borrowers existing policy or do we have to purchase a completely new policy to force place?
Thanks!

You will probably have to see if the Insurance Company will approve that.

Even if you are allowed to pay the premium for teh borrower's policy, if it is more than 30 days after the expiration date and the insurance comapny accepts the payment, the insurance company will enforce a 30 day waiting period from the date of payment. And yes, they are allowed to do it.

Under the Mandatory Purchase Guidelines, the lender can force-place using an SFIP. I believe this would give you the ability to pay the borrower's premium. HOWEVER, you would still need to send the proper notices, allowing 45 days to purchase insurance, AND the bank would have to eat any premium that covers any of the 45 day notice period.

In your case, since you have already sent notices and waited 45 days, your bigger issue would be the waiting period the insurance company enforces if you do pay the premium due on the "existing" expired policy. Best bet....force a brand spanking new policy!

I know this is an old post, but I'm slowly catching up! I am battling with our provider of Flood force-placement, and cannot get them to change the insured to the borrower...they claim the following:
I have addressed this question with our carrier and have been advised that the certificate is fine. The master policy is issued to "XYZ" Bank as our insured. The borrower is shown on the certificate, but Collateral Protection Coverage is intended to protect the interest of the lender.

What should I do now? Start looking for another vendor?

You can always check out the NFIP MPPP program:

http://www.fema.gov/wyo_company_mppp

Partner, we just went through the same ordeal...we changed back to a local company and/or whoever had the property insured last to ensure the policy was on the borrower's behalf...not just us.

At my former bank, fought that battle and lost. However, examiners, through two exams, didn't have an issue with it. Perhaps they didn't dig deep enough.

"Collateral Protection Coverage" does not sound like the right type of policy. For flood the borrower must be covered, not just protecting the collateral for the bank.

Maybe I am pushy (!), but I had our Lloyds policy cover our borrowers for whom we had to force place.

To get really nitpicky...what is the difference in protecting the collateral and protecting the borrower? Do they not serve the same purpose? I understand if loss proceeds are solely used to payoff/down a mortgage, but if the policy covers this damage/that damage/removal/prevention/etc...even tho it's "Lender Placed Coverage" and the lender has to coordinate/file claims/receive payment...is that still not to the 'borrower's benefit'?

What I have a problem with is that the borrower is blind to these coverages...particularly those in place to prevent damage, such as allowances for moving items and covering/sandbags, etc., to prevent damage.

What I have a problem with is that the borrower is blind to these coverages...

Why would they be blind to these coverages? As a named insured they should be getting a copy of the insurance policy.

Not according to the above post and the discussion on "collateral protection coverage". I have a vendor who is adamant that their insurance is handled properly...but looking at the dec page, the bank is the insured.

They cover everything you would want covered...damage, prevention, debris...everything, but the insured is the bank because it's "Lender Placed Coverage".

The argument is this: "On behalf of" ...well, my understanding of that definition is "purchased for/in their interest". That can be taken more than one way...if it covers prevention/damage/repair, is it not "in their interest" as well? It's not paying towards the loan, it's paying towards the property. This has me confrused now!

All I can say is that banks are being hammered for this type of insurance when it comes to flood insurance and I suggest you rethink your force placed flood insurance provider as it is just a matter of time before your regulator figures it out.

rlcarey is right on...saw it firsthand myself

I totally 110% agree...I'm not arguing...I've fought it at more than one bank...but the "on behalf of" gave me pause. Wouldn't it be really, really nice if they just said it plainly and clearly so you didn't have to constantly justify how you are right!

LOL!

At my aforementioned former bank, we used Lloyds, the bank was "the insured" but the borrower DID get a copy of a "certificate of insurance." For what THAT'S worth.

Looking at documentation related to a force placed policy and not sure if this is an acceptable type of policy. Any assistance would be greatly appreciated. Some excerpts from the document I am viewing:

Underwriter's at Lloyds, London
FLOOD MORTGAGE SECURITY COVERAGE - NOTICE OF INSURANCE

Insured Lender: bank
Borrower/Additonal Insured Name: borrower

Special Conditions: The flood insurance extended by this Notice of Insurance is subject to all of the rates, terms, conditions, and coverages under the Insured Lender's Master policy. The flood coverage is limited and may not meet your flood insurance coverage needs.

I am concerned since this is coverage under a master policy. I have not yet reviewed the master policy and am wondering if I even need to obtain and review the master policy if this is not the correct type of insurance for force placed flood insurance. Thoughts?

The borrower is a (additional) named insured so that should not be an issue. Lloyds made this change to comply with the "on behalf" requirements several years ago when their bank cusomters started to get written up for it.

Thank you rlcarey. Is there anything in particular you are aware of with these types of Master polcies that I should be on the lookput fpr when reviewing it?