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Will the new force placement rules apply to a builders risk insurance policy that is being carried during the interim construction phase?
If your loan contract requires this insurance and it isn’t maintained, you have basis for force-placing. And since this insurance isn’t exempt under the 1024.37 force-placement rules, in my opnion, it would be covered.
1024.37(a)(2) Types of insurance not considered force-placed insurance. The following insurance does not constitute “force-placed insurance” under this section:
(i) Hazard insurance required by the Flood Disaster Protection Act of 1973.
(ii) Hazard insurance obtained by a borrower but renewed by the borrower’s servicer as described in § 1024.17(k)(1), (2), or (5).
(iii) Hazard insurance obtained by a borrower but renewed by the borrower’s servicer at its discretion, if the borrower agrees.
(b) Basis for charging borrower for force-placed insurance. A servicer may not assess on a borrower a premium charge or fee related to force-placed insurance unless the servicer has a reasonable basis to believe that the borrower has failed to comply with the mortgage loan contract’s requirement to maintain hazard insurance.
If we have a take out commitment on this loan would it have an impact on the force placing of the insurance? I would think not, but wanting to confirm.
My understanding of your first question was that it was a construction permanent loan. But if it is temporary financing (i.e. construction loan only) RESPA wouldn’t apply and the RESPA force-place rules wouldn’t apply. Look at 1024.5(b) for the definition of temporary financing: https://www.bankersonline.com/regs/12-1024/12-1024-005.html.
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