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Thursday, May 16, 2013

What did the FDIC Presentation on Mortgage Servicing Rules say about Lender-Placed Insurance?

If you missed Wednesday's presentation by the FDIC on the mortgage loan servicing rules, a link to the slides is included below. The presentation covered rules made under the Truth in Lending Act (TILA) and the Real Estate Settlement Procedures Act (REPSA).

Topics include periodic statements, rate adjustment notices, prompt crediting of payments, forced-placed/lender-placed insurance (LPI), error resolution, servicing policies, early intervention and continuity of contact for delinquent borrowers, and other loss mitigation procedures.

The information on LPI, including escrow account requirements, is included on slides 33-37. An excerpt of from the FDIC presentation on LPI requirements:
  • Servicer must have “reasonable basis” to obtain force-placed insurance before charging borrower; and
  • Must have provided written notices to borrower in advance and in compliance with the timeframes provided for in the rule.
  • Charges must be reasonable and for services actually performed; and
  • Model notices in Appendix MS-3 of Regulation X may be used to comply with the notice requirements.
  • Servicer must cancel force-placed insurance upon proof of borrower’s hazard insurance coverage; and
  • Must refund to borrower any premiums and related fees for overlapping periods.
  • Servicer may purchase insurance only if 'unable to disburse funds' from borrower’s escrow account; and
  • Unable to disburse funds: reasonable basis to believe hazard insurance has been cancelled or not renewed for reasons other than non-payment of insurance premiums or vacant property.
View the FDIC presentation.