[jwelch]

I mailed renewal notices for a customer for their force placed insurance in September. Today, (10/22) I was handed the renewal notices that had been returned to the bank.
What is the proper procedure when these are returned?
I verified that the address is the same as we have on file… can I still charge the loan for the insurance?

Topic

[rcooper]

Based on your comments, I assume the borrower didn’t notify you of the address change. (Depending on the circumstances of the loan, this could be out of the ordinary meaning your loan department might need to look into the loan/borrower). Either way, I’m sure your bank has already made contact with the borrower to determine his/her current mailing address.

As it related to the disclosures, it is the borrower’s responsibility to provide you, as the lender, with a change of mailing address so you may communicate timely and effectively. The flood regulations require that you notify the borrower of inadequate coverage and the need for the borrower to purchase flood insurance. It seems you did attempt to notify the borrower as required, but because the borrower failed to notify you of an address change notification was halted – the fault that it wasn’t received lies with the borrower not you as the lender. If you have documented the circumstances and your efforts to deliver the notice I don’t believe you would be criticized for following normal force-placement procedures. I would recommend that you make every attempt to provide the notice to the borrower ASAP, and remember to document your efforts. You want to create a clear picture for auditors and examiners.

[jholzknecht]

The flood rules allow you to force place insurance immediately upon the lapse of coverage. In addition to continuing efforts to contact the borrower you should if you have not done so already get the insurance in place in order to minimize the gap in coverage.

[Author]

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