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Must the bank restart the force placement process and send out a notice after a forced-placed flood insurance policy expires or may the bank just renew the force-placed policy?

A forced-place flood insurance policy on one of my bank’s portfolio loans is nearing expiration. Must the bank restart the force placement process and send out a notice after the policy expires, or may the bank just renew the force-placed policy?

The bank may simply renew the force-place policy. No notice is required if the force placed policy is already in place. The agencies addressed this situation in their webinar, entitled “2015 Outlook Live Interagency Flood Insurance Regulation Update.”

Question 10 in the webinar asked what process the lender should use to renew force-placed flood insurance if a borrower’s force-placed flood insurance is about to expire. The response explains that the regulation requires the lender to notify the borrower if the lender “determines at any time during the term of the designated loan that the building or mobile home and any personal property securing the designated loan, is not covered by flood insurance, or is covered by flood insurance in an amount less than required.” In this scenario, the force-placed policy is about to expire – it has not yet lapsed so the property is still covered by flood insurance. Thus, the regulation does not require additional notification to the borrower when force-placed insurance is due for renewal.

When the lender is notified that the force-placed flood insurance policy is about to expire, the lender should follow its normal communication practices with its insurance provider to renew the flood insurance policy to ensure that flood insurance coverage remains in place. The lender, at its discretion, may notify borrowers that the lender is planning to renew or has renewed the force placed policy to encourage borrowers to seek their own policy, which may be available for a lower premium amount. (July 2018)

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