Lulu,
I went to the Q & A’s for Flood Insurance. The Q & A that I keyed on was number 62.
62. Does a lender or its servicer have the authority to charge a borrower for the cost of insurance coverage during the 45-day notice period?
PROPOSED ANSWER: No. There is no authority under the Act and Regulation to charge a borrower for a force-placed flood insurance policy until the 45-day notice period has expired. The ability to impose the costs of force placed flood insurance on a borrower commences 45 days after notification to the borrower of a lack of insurance or of inadequate insurance coverage. Therefore, lenders may not charge borrowers for coverage during the 45-day notice period. This holds true regardless of whether the force placed flood insurance is obtained through the NFIP or a private provider.
I understand that you are not charging them anything during the 45 day period, but that you are going back after the 45 days have past (assuming they don’t purchase insurance and you have force place insurance setup) and charging the customer for the time frame in which you had force placed insurance in effect during the 45 days.
The above Answer states that lenders may not charge borrowers for coverage during the 45-day notice period. I will agree that that can be read and taken two different ways. To keep yourself out of trouble with your regulators I would go with the most restrictive interpretation and not charge them period for the coverage in the 45 day period. Another thing to be aware of is UDAP and who knows they might even try to get you with a UDAP violation based on the fact that the insurance is so much more expensive than if the customer bought it. I would advise not charging at all for the 45 day time period regardless if you charge them for it after the time had passed or not.