HELOCs & Fixed HEs - Flood Insurance Tracking

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Question:

On HELOCs and fixed HEs, if the property is in a flood zone, are there any special exemptions from tracking flood insurance for these customers? Do you assume the first mortgage holder will monitor and escrow for insurance coverage? Since we do not escrow for second mortgage loans, how can I effectively guarantee that the customer or first mortgage holder is keeping insurance in force?

Answer:

No, you must insure that covered loans maintain the appropriate insurance coverage for the life of the loan. No. Set up a tickler system to monitor the policies expiration dates and communicate with the insurance company/agent or the first lien holder to see if the policy was renewed. If the first lien holder is uncooperative then send a letter to the borrower requesting proof of insurance and if they do not provide the insurance then institute your 45 day force placement procedures. Also, you should have your endorsement on the policy. If this was done then you should also receive any cancellation notices.

First published on BankersOnline.com 12/11/06