Force Place Flood Insurance - Verbal Notification

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Question:

Before we force place flood insurance, we verbally notify the customer. I realize this leaves no documentation to prove we notified them, but that has always been our practice. The examiner is saying that the notice must be in writing. We disagree, as the regulation only says notify. Other places in the regulation it specifies a written notice for other things, but it does not say written here. Can you give me something to back up our position that this is not a violation? We do not use the MPPP, which does use written notifications.

Answer:

From the new Flood Insurance Q&A:

"The Act and Regulation require the lender, or its servicer, to send notice to the borrower upon making a determination that the improved real estate collateral’s insurance coverage has expired or is less than the amount required for that particular property, such as upon receipt of the notice of cancellation or expiration from the insurance provider. The notice to the borrower must also state that if the borrower does not obtain the insurance within the 45-day period, the lender will purchase the insurance on behalf of the borrower and may charge the borrower for the cost of premiums and fees to obtain the coverage. The Act does not permit a lender or its servicer to send the required 45-day notice to the borrower prior to making a determination that flood insurance coverage is inadequate."

While you may not see the word "written" anywhere, I'm not sure how you "send" a verbal notice. I do not believe that this is an argument that is winnable. Your only hope would be that it would indicate that the notice can be verbal and you will not find that statement either.

First published on BankersOnline.com 9/21/09