[timob1973]

We listened to a webinar yesterday and the presenter noted that if we force place flood insurance that the borrower cannot replace the force placed insurance with a private flood insurance policy. Is this true? And if so, can you provide the site?

[rcooper]

This wasn’t one of our webinars/recordings, correct?

I’m not sure exactly how the presenter stated this, but you can accept a private policy in place of a force place policy if it meets the criteria. Perhaps what this presenter was talking about was the extra work/potential confusion for your staff because often times borrowers only bring you a dec sheet for review, which was acceptable under the previous rules. Review of a dec sheet may not be sufficient for private policies and you would need to conduct the same review as you would if there was not a force placed policy in place.

From p. 20-21 of the final rule:
One commenter was unsure how the mandatory acceptance requirement would affect preexisting force placement requirements
28 that provide for the release of a force placed policy following the presentation of a declarations page by the borrower evidencing the borrower’s purchase of flood insurance. Another commenter asked whether regulated lending institutions are expected to force place insurance if the full policy is not available.

The Agencies acknowledge that under existing force placement requirements, a declarations page is sufficient to evidence a borrower’s purchase of flood insurance. However, a declarations page may be insufficient for a regulated lending institution to make a determination that the institution must accept a private flood insurance policy in satisfaction of the flood insurance purchase requirement if the declarations page does not provide enough information for the institution to determine that the policy meets the statutory definition of “private flood insurance.” In these circumstances, the regulated lending institution should request additional information about the policy to aid it in making its determination.

[timob1973]

This was not a webinar/seminar that was put on by Jack. The webinar was provided by our Core Provider. The presenter may have just gotten confused or misstated something.

Thank you for your help!!!

[rcooper]

No problem. Glad we could help!

[jcopeland]

A new twist on forced placed flood Insurance. Since the flood insurance premium is being added to the loan; Has anyone run into any problems with How it is added to the loan. As we are technically “loaning” the borrower the premium, is it done as a debit to the loan and does that create a MIRE? Should it be added to the loan as a fee? I have never had this come up in an exam but the FDIC has more time on it’s hands now.

[rcooper]

This has been an issue for a few years now. I’ve heard this mostly from FDIC regulated institutions. The ABA got some clarification from the regulators via an interagency letter: https://bankingjournal.aba.com/2017/06/agencies-clarify-interpretation-on-lender-placed-flood-insurance/.

Let us know if we can answer any other questions.

[jcopeland]

This is a big turn from the industry standards that we have been using for a long time. So, if the “agencies” are looking at this as a “triggering event” have they given any clues as to the expectations of the banks to the borrower? Are the banks to notify he borrower as if it was an increase or extension, (MIRE) to the loan, when they have been notified that the insurance premium will be added to their loan?

[jholzknecht]

This is informal guidance from the agencies. It is not in the interagency regulations. It is not in the interagency Qs & As. For several years we have recommended that financial institutions handle force-placed premiums as a MIRE event, when the premiums are added to the loan. Any time you make, increase, renew or extend, this is an increase, you must comply with all of the flood insurance requirements – determination, notice, insurance, escrow, etc.

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