I am wondering how everyone collects on the cost for force placed homeowners insurance. We finally have a loan where we are force placing homeowners insurance and have had several different ideas thrown in the ring on how to recoup the cost from the borrower, but we are not certain what is and if there is a correct way.

Initially we think it should be applied to loan balance as a fee that would be reflected in the payoff amount - just increase the loan balance as the loan will not be re-amortized. We also thought it could be placed as a fee that would show up on the next statement to be paid immediately. Then we had our servicer state we could set up an escrow account for it labeled "Other Escrow" and have it paid over time. We will admit that sounded a bit off to us.

Can anyone tell us if there is a right way, or a most common way, to assess this fee to the customer?

Thanks!

What do your legal documents say you will do?