The new regulations prohibit a servicer from charging a borrower for force-placed insurance unless the servicer has a reasonable basis to believe that the borrower did not maintain required insurance coverage and the servicer sent the appropriate notices to the borrower. The regulations require two notices and provide timing and content requirements for those notices. The amount of force placed premium must be stated in borrower notifications. The CFPB included sample letters for borrower notifications servicers may use to meet this requirement. Servicers must also cancel force-placed insurance within fifteen days of receipt of a borrower’s existing insurance coverage. One of the provisions not mandated by the Dodd-Frank Act, but found in the final version of the rules, is the requirement that if a Borrower has an escrow account for the payment of hazard insurance, the servicer may not purchase force-placed insurance unless the servicer is unable to disburse funds from the borrower’s escrow to continue borrower’s hazard insurance policy. A servicer is considered unable to disburse funds if the policy was cancelled for reasons other than non-payment of premiums or the property is vacant. A servicer is not considered unable to disburse funds because the escrow account has insufficient funds.
RIS is closely reviewing the new regulations and has provided to its clients a comprehensive document that depicts the enhancements and changes to the Lender placed program that are already being implemented as a result of the new regulations.