Posted By: Many Hats
Opinion on FDPA amendments from Biggert Waters - 05/28/13 01:45 PM
There are two issues that still remain unresolved in my mind:
1) The FDIC FIL 14-2013 states that this amendment was made to the FDPA as it relates to FP insurance:
• “Provide that the premiums and fees that a lender or servicer may charge the borrower include premiums or fees incurred for coverage beginning on the date on which flood insurance coverage lapsed or did not provide sufficient coverage amount”
A policy lapse occurs when the policy has expired and you do not renew it within 30 days of the expiration date.
Question: So, did they mean to use the word “lapse” to mean that the Bank can only charge premiums from the date of lapse (which essentially means that the Bank will still have to eat 30 days’ worth of premium since they can only charge from the lapse date, instead of the EXPIRATION date)? They used the word “lapsed” instead of “expired”. Was this on purpose or an oversight?
2) The FDPA provides that “a lender or its servicer must notify a borrower if it determines that the flood insurance coverage on the improved real estate or mobile home serving as collateral for the borrower’s loan has expired or is less than the amount required for that particular property (42 USC 4012a(e)). The notice must inform the borrower of the need to purchase flood insurance. If the borrower fails to purchase flood insurance within 45 days after notification, the lender or servicer must purchase flood insurance on behalf of the borrower”.
Question: So, taking this language to mean If the borrower fails to purchase insurance within 45 days, THEN the Bank must FP, must the Bank send the notice after expiration – give them 45 days to purchase, THEN purchase it on the 46th day if they did not (which is how I understand it)? Or, can the Bank FP at any time?
1) The FDIC FIL 14-2013 states that this amendment was made to the FDPA as it relates to FP insurance:
• “Provide that the premiums and fees that a lender or servicer may charge the borrower include premiums or fees incurred for coverage beginning on the date on which flood insurance coverage lapsed or did not provide sufficient coverage amount”
A policy lapse occurs when the policy has expired and you do not renew it within 30 days of the expiration date.
Question: So, did they mean to use the word “lapse” to mean that the Bank can only charge premiums from the date of lapse (which essentially means that the Bank will still have to eat 30 days’ worth of premium since they can only charge from the lapse date, instead of the EXPIRATION date)? They used the word “lapsed” instead of “expired”. Was this on purpose or an oversight?
2) The FDPA provides that “a lender or its servicer must notify a borrower if it determines that the flood insurance coverage on the improved real estate or mobile home serving as collateral for the borrower’s loan has expired or is less than the amount required for that particular property (42 USC 4012a(e)). The notice must inform the borrower of the need to purchase flood insurance. If the borrower fails to purchase flood insurance within 45 days after notification, the lender or servicer must purchase flood insurance on behalf of the borrower”.
Question: So, taking this language to mean If the borrower fails to purchase insurance within 45 days, THEN the Bank must FP, must the Bank send the notice after expiration – give them 45 days to purchase, THEN purchase it on the 46th day if they did not (which is how I understand it)? Or, can the Bank FP at any time?