We have a loan that originated close to 10 years ago with collateral located in Zone X.

We received notice of map update that placed the collateral in Zone AE effective 04/25/24.

The borrower was notified in accordance with the regulation and was aware of this update, but did not obtain voluntary coverage. The bank ended up force placing a policy as the borrower was in the process of obtaining a LOMA and refused to get voluntary coverage during the application process. (Our lender placed policy is in effect 07/29/24-07/29/25, as we allow 45 days for the borrower to obtain a voluntary policy in relation to a map update.)

We received a LOMA that did update the flood zone to X, dated 02/20/25.

I am looking for guidance on how to handle the cancellation of the lender placed policy. In the past we have updated the flood zone with the effective date of the LOMA, which in this case is 02/20/25. But alternatively, should the bank document the flood zone effective date back to 04/25/24 in relation the current Map Panel Date?

I have skimmed this site for related inquiries, and referred to other guidance available, but cannot find any reference to this specific scenario.
I appreciate any additional guidance on how to handle this situation.

They were in a SFHA until the LOMA was issued. You could charge the borrower until the effective date of the LOMA, If they had bought an NFIP policy, they would have been eligible for a refund.

So your stance is that the bank "could" charge the borrower for the force placement of the lapse from 07/29/24-02/20/25. I generally agree with this stance.

What I am trying to determine is if the bank "must" prove evidence of flood insurance in the file up to the date the LOMA was issued.
Or would it be reasonable to cancel the policy in full since the LOMA was issued and the Map Effective date is 04/25/24, which predates our force placement.

I would maintain the records that you have to show that you took the appropriate action prior to the LOMA being issued. Whether your insurance company will allow you to retroactively cancel the forced placed insurance in order to refund the customer is an operational issue and not a flood issue.

Got it, thanks!