In a recent compliance review, a borrower was found to be uninsured (this was an acquisition loan in which the policy had lapsed). Loan Servicing was informed and immediately began the 45 day notice cycle in an attempt to secure adequate flood coverage. The lesser of the three criteria for determining the minimum amount of flood insurance required was $181,xxx. The customer was very cooperative, contacted his insurance agent, purchased insurance, and notified the bank.

The notice cycle was stopped since insurance was expected. When the flood declaration page came in it had the old policy amount of $50,000 and not the amount requested by the bank. Because of this, insurance is now in place, but insufficient and the final letter in the cycle was not sent.

The borrower does not want to pay the higher premiums and has requested a 60 day extension to get a LOMA.

(1) Should the 45 day letter cycle be started over again since it was paused and the bank received insufficient coverage or should the bank still force place on day 45 after the original notice and absorb the violation for not sending the notice 15 days prior to force placement?

(2) Does the bank have any recourse to grant some sort of extension to allow the borrower to apply for a LOMA... It seems to me we would need flood insurance in place while the borrower was waiting to hear back from FEMA.

You informed the borrower the amount of insurance needed and they failed to meet that requirement. IMO you do not need to start the 45 day cycle over. Force place your required coverage upon expiration of the original notice.

No one in your bank has the authority to allow/approve a 60 day extension without violating law and subjecting the bank to CMPs.

If he is granted the LOMA then he gets 100% of his premiums refunded.

Also - what 15 day notice prior to force placement?

I also hope you force place private insurance as you cannot force place another NFIP policy.

As an aside..... To prevent issues going forward, you should not stop your notification process until you have a proof of coverage (dec page, application & proof of payment, dated receipt for policy renewal payment) in hand.

I was just going to post that, Dani. The bank is on the hook, never stop the process until you have the required proof in hand, not a promise.

I don't think you start the 45 day clock over. It didn't stop as the borrower didn't provide adequate insurance, as you required. If they don't have the proper amount, correct zone, etc., you must force place.

Is only the one notice required (at the time the bank determines there is no coverage or flood coverage is less than the minimum required)? Reading through 229.7 it appears that the rule only requires one.

We do not get insurance through an MPPP.

And I agree about not stopping the clock in the future, regardless of what the bank thinks it may or may not receive in terms of flood coverage. I was going to recommend that to our Loan Servicing Department.

Thank you all.

If you force with MPPP, 2 letters are required with a 3rd optional letter.

If you force with private policies, there is no required number of letters to send. You just need to send one to start the process, and your 45-day clock.

You are going to have to coordinate the deductible on the private policy to the amount of the NFIP policy or you are going to be buying insurance on an amount that is already covered. Insurance is not cumulative.

I agree with Dan. My recommendation would be to continue the original timeline because you did not receive adequate coverage. Banks have very little room to provide borrowers with any additional time to get coverage. The borrower generally will not have to pay for force placed insurance if it is confirmed they are not in a flood zone or if they provide insurance back to the original date. The penalties for non-compliance are substantial. Be sure to read guidance carefully and document thoroughly.