You know that implementing force-placed insurance, also referred to as lender-placed insurance, includes a multitude of regulations that require you to take itemized steps to stay compliant.
Keeping track of these steps is no easy feat, but we’re making it as simple as possible with modern insurance tracking and complementary resources like these articles, webinars and our new Ask Us Anything page where you can speak with me directly regarding your compliance questions.
When it comes to Force-Placed Insurance, there are three main things every servicer must remember.
If you focus on these elements, you will find it much easier to stay on top of the ever-changing regulations.
1. RESPA Compliance
RESPA requires certain notice letters to be sent before charging a borrower for force-placed insurance. Thankfully, the CFPB provides lenders with model letters that can be used to remain compliant with the language requirements for notice letters in RESPA 1024.37. Check them out here: RESPA Model Letters.
2. Flood Compliance
Similar to the requirements contained in Section 1024.37 of RESPA, the Agencies require lenders to notify borrowers before charging for force-placed flood insurance, however, there are no model letters to follow.
Additionally, for flood insurance, lenders are required to force-place flood insurance coverage in an amount at least equal to the lesser of the following:
- Outstanding principal balance of the loan(s);
- The maximum limit available for the type of structure under the NFIP; or
- The “insurable value” of the structure.
3. Billing Compliance
Both RESPA and flood compliance include requirements for refunding borrowers when evidence of duplicate coverage is received. Unfortunately, the timing requirements differ.
For RESPA, a lender must cancel the force-placed policy and refund to the borrower all charges within 15 days of receiving evidence of hazard insurance that complies with the loan contract’s requirements.
On the flood side, however, a lender must cancel the force-placed policy and refund to the borrower all charges within 30 days of receiving evidence of adequate flood insurance that complies with the Act and Regulation.
With numerous regulations and evolving rules, it’s important to have a trustworthy resource for these issues. Remember, you can reach out to me with your questions and it’s my pleasure to help you find the answers.
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