Escrowing and force placement of premiums
If the credit union requires an escrow for taxes, insurance premiums, fees or other charges, then it must also escrow for required flood insurance premiums. If the loan is covered by the Real Estate Settlement Procedures Act (RESPA), then the credit union must follow RESPA’s requirements on escrow account statements and limitations on the amount in the account.
If the credit union determines that the borrower allowed the flood insurance coverage to lapse, the credit union must notify the borrower that he must obtain the insurance. If the borrower doesn’t provide evidence of insurance coverage within 45 days of the notification, the credit union is required to force place (purchase) the insurance on the borrower’s behalf. The credit union may charge the borrower for the cost of the premiums and fees.
Notice to FEMA
The credit union must notify FEMA (via the insurance provider) of the identity of the loan servicer at the time the loan is made, increased, extended, renewed, sold, or transferred. If the servicing is transferred, notification must be made within 60 days of the transfer. The notice must be sent to the insurance carrier that issued the flood insurance policy so the mortgagee endorsement can be updated.
This article only scratches the surface. For additional information, visit CUNA’s e-Guide to Federal Laws and Regulations, available at cuna.org (select “regulations & compliance”).
VALERIE Y. MOSS is CUNA’s director of compliance information. Send compliance questions to firstname.lastname@example.org.