We know you have questions when it comes to CFPB Force-Placed Insurance. Let’s start at the beginning: What is it?
The CFPB defines force-placed insurance as “hazard insurance obtained by a servicer on behalf of the owner or assignee of a mortgage loan that insures the property securing such loan.”
This insurance protects the lender’s asset when the borrower is not complying with their insurance coverage requirements according to their loan contract.
Before charging a borrower for force-placed insurance (AKA lender-placed insurance), servicers must take clear, itemized steps to ensure they comply with all regulations.
How can you be sure you protect your loans and remain compliant?
Here are some of the most frequently asked questions we receive about CFPB Force Place Insurance:
What is the basis for charging a borrower for force-placed insurance?
A lender must have a reasonable basis to believe that the borrower has failed to comply with the mortgage loan contract’s requirement to maintain hazard insurance. See the CFPB’s interpretation of reasonable basis.
What are the CFPB requirements before charging a borrower for force-placed insurance?
- Initial Notice - At least 45 days before charging
- Reminder Notice - At least 30 days after the initial notice and at least 15 days before charging for force-placed insurance
What information should be included in the notices?
Miniter recommends using the model forms provided by the CFPB.
Per the CFPB’s 2016 Final Rule, additional information that the lender needs to communicate to the borrower should be included on separate pieces of paper in the same transmittal.
How should the notices be delivered to the borrower?
A servicer may play the notice in the mail using a class of mail not less than first class.
Conclusion
If you plan to charge borrowers for force-placed insurance, understanding the communication requirements is key.
We hope we have answered your questions, but please do not hesitate to send us any follow-ups you may have! Reach me any time at ecarr@miniter.com and please join our email list for news about industry tips, webinars and more FAQs.
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