Federal regulators are warning banks and thrifts that they must comply with a flood insurance law passed last year that imposes penalties of $2,000 a day for failing to follow the force-placement provisions.
It is the regulators’ position that the force-placement provisions of the
The statement says lenders and servicers can charge premiums and fees for force-placed insurance. But they must terminate the force-placed policy within 30 days of receiving confirmation of a borrower’s existing flood coverage.
The servicer should refund “all force-placed insurance premiums and fees paid by the borrower during the period of overlap between the borrower’s policy and the force-placed policy,” the statement says.
In terms of confirmation of an existing policy, borrowers can send the declaration page of their policy, which includes the policy number and contact information of the insurance company and agent.
Later this year, the federal banking agencies will be issuing proposals for other provisions in the Waters-Biggert Act that are slated to go into effect on July 6, 2014.
One provision will require lenders and servicers to establish escrow accounts for flood insurance premiums and fees.
Another provision will open the door for private flood insurance. Lenders and services will be required to accept private insurance policies if the coverage satisfies the standards of the Waters-Biggert Flood Insurance Act of 2012.
