[kowsley]

In the last compliance master’s group session we covered the new rules on prohibition on financing single premium credit life insurance. I believe that you stated Jack that VSI/LSI is defined as credit life in these rules; therefore, we would no longer be able to finance VSI on a mobile home loan, for example. Is that correct? If so, we have a blanket policy for VSI for any loans impacted, how will we handle that going forward? Will that be considered “financing indirectly”? Thanks!

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[jholzknecht]

The rule prohibits financing premiums for credit insurance. The term credit insurance, includes, but is not limited to credit property insurance. The term “credit property insurance” is not defined, but those that I have discussed this issue with agree that the tm would include VSI/LSI. Several of us have asked the CFPB to clarify the term “credit property insurance.”

So it appears that the issue would affect VSI/LSI in connection with your mobile home loans. Financing a single premium product would be prohibited. Imposing a monthly premium on the borrower would be acceptable. I assume that your blanket policy protects your entire portfolio. Do you pass the cost on to individual borrowers? Does the borrower pay a single premium up front or a monthly charge?

[kowsley]

We currently do pass the cost on to the individual borrowers and currently finance a single-premium; that being said, I assume we will have to either charge monthly or have the customer pay cash for the insurance.

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