Partnership Aims to Automate MPPP Option
The Flood Insurance Agency here has entered into an exclusive underwriting agreement with American Bankers Insurance Co. of Florida to introduce a new lender-placed flood insurance program, known as MPPPFlood.com.
And Evan Hecht, the CEO of TFIA, says the new program will make the Federal Emergency Management Agency's lender-placed insurance option easier for mortgage servicers to use. FEMA administers the National Flood Insurance Program.
Mr. Hecht told MSN that while federal law requires lenders to purchase insurance on behalf of homeowners who fail to buy government-backed flood insurance on their own, the NFIP's own lender-placed insurance option has lost business to private lender-placed flood insurance options. The NFIP's lender-purchased program, known as the Mortgage Portfolio Protection Program, does not require all the underwriting details that are usually required, because lenders sometimes do not have access to information such as the age of the property and the foundation type.
But when lenders opt for private lender-placed programs, it means that the NFIP's portfolio shrinks. That has vexed the NFIP, because risk is then spread out over a smaller portfolio, diminishing the program's actuarial soundness.
But many lenders found the NFIP's 25 pages of rules and regulations for participating in the MPPP too complex, and so they turned to private-sector options. Mr. Hecht hopes his solution, which automates and streamlines participation in the NFIP's lender-placed coverage, will change all that.
In addition, the private lender-placed insurance programs do not have the backing of the federal government in the event a "storm of the century" generates huge losses, Mr. Hecht noted.
"A lender that is using those other programs is hoping those other programs have enough money to pay the claims," he said.
Under terms of the agreement, TFIA has agreed to place all business written in conjunction with its MPPPFlood.com service with American Bankers, which will provide underwriting assistance, policy issuance, claims handling and marketing support.
Mr. Hecht said American Bankers' claims management expertise is one reason he selected the firm as a partner for the service, describing their in-house claims support as "a cut above the best."
MPPPFlood.com is a newly created, patent-pending service for keeping lenders' loan portfolios in compliance with federal flood insurance regulations. Mr. Hecht said the service makes FEMA's Mortgage Portfolio Protection Program more attractive by automating the calculation of lender-placed flood insurance premiums, printing required FEMA warning letters, generating applications to place insurance, and printing all documents required to cancel a policy.
The MPPP policies are the only lender-placed policies whose claim payments are funded by the United States government, he said.
In addition, the MPPPFlood.com solution offers an optional, standard policy conversion that invites affected mortgage borrowers to switch to a lower-cost borrower-paid insurance policy through FEMA's National Flood Insurance Program.
The optional policy conversion is comprised of a series of automated letters that encourage borrowers to contact TFIA's staff. Lender clients can choose to opt in or out of the Optional Standard Policy Conversion Program. In addition, lenders can choose online which borrowers they would like to enroll in the program.
Both MPPPFlood.com and the Optional Standard Policy Conversion Program are provided to lender clients of TFIA free of charge.
Mr. Hecht said the optional conversion program is the first lender-placed flood insurance program that clearly shows borrowers the benefit of replacing a lender-placed policy with a policy they choose to purchase themselves. And American Bankers' underwriting knowledge, response time and in-house claims department will allow the two companies to provide exceptional service, he said.
American Bankers and TFIA together wrote over 1,000 new NFIP flood policies during the past 10 months, and Mr. Hecht said he expects to double that policy growth next year. Mr. Hecht said the NFIP is a valuable federal program that makes it possible for homeowners and property owners in designated flood hazard areas to purchase insurance coverage. And growing the NFIP's coverage base improves the program, he believes.
"The National Flood Insurance Program is good for this country. It's the only place you can voluntarily buy flood insurance. The more you spread risk around, the better it is."
Communities voluntarily participate in the NFIP. To become a participating community, local governments must adopt building codes that help to mitigate the risk of flood damage. That means new structures must be built above a base flood elevation in those communities, though existing structures can continue to be covered.
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