Mortgage Servicing Rules

Borrower Notices are part of the new Mortgage Servicing Rules for Force Placed Insurance. 

Among the numerous changes to mortgage servicing scheduled to take effect in January 2014, there are several amendments to Regulation X (RESPA) including the new Force Placed Insurance Rule.  In accordance with the finalized mortgage servicing rules from the CFPB, RIS is reviewing all borrower notices for compliance and modifying as needed.

As part of the new rule, there are clear instructions for the wording and timing of notices sent to borrowers regarding hazard insurance.  A series of 2 notices is required, the first sent 45 days prior to force placement, the second notice sent 30 days later.  Click below for model forms for borrower notices.

More Force Placed Rules to be aware of:

As the end of the year approaches, lenders are working diligently to make sure they are ready for the changes to be brought about as a result of the Dodd Frank Act.  RIS is here to help unravel the questions surrounding the new rules and assist in preparation for compliance in the new year.

While notices are the primary focus of the new regulation, the rule does have other requirements, such as:

  • Servicer must refund unearned premium within 15 days of receiving evidence that the borrower has adequate insurance in place.
  • Servicer cannot force place on an escrowed loan if the borrower’s insurance was canceled for non-payment.
  • Servicer must have a reasonable basis to believe force placement is necessary.  According to CFPB commentary, “reasonable basis” is satisfied if the servicer acts with reasonable diligence to determine the status of the borrower’s hazard insurance and does not receive evidence of insurance in response to the required notification.
  • Charges for all forced placed insurance must be “bona fide and reasonable,” defined as a charge for a service actually performed that bears a reasonable relationship to the servicer’s cost of providing the service, and is not otherwise prohibited to applicable law.

Click here for a full copy of the final rule.