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Midwest bank was fined $3.6M by the OCC over flood violations

Avoid these common lender violations:

Failing to verify flood insurance is in place before a loan closes

 

Pitfalls:

-Confirming proof of policy purchase vs. estimate

-Being loose with borrower about proof of insurance deadline

-Waiting until last minute to provide flood insurance binder to borrower

Failing to follow the requirements for force-placed insurance

 

Pitfalls:

-No process to verify borrower insurance lapses

-Lenders playing loose with coverage requirements

-Clearly communicating to borrower the need for coverage of outbuildings

-Lack of follow-up with third-party vendors who enforce force-placed insurance

-Failure to update flood insurance when loans are refinanced or extended, or a new loan is issued

Let our servicing experts help clean up your flood insurance program in three easy steps:

1) Assess your flood insurance plan

2) Identify compliance gaps

3) Remediate to avoid risk and penalities

Important Update for Lenders on Flood Insurance Requirements

The U.S. Department of Housing and Urban Development (HUD) audited FHA-insured loans serviced in 2020:

  • Identified 31,500+ loans in SFHA flood zones lacking adequate flood insurance
  • Lenders exposed to at least $4.5 billion in risk
Newbold Advisors Flood Insurance

Get the Facts about Flood Insurance Requirements

NFIP (National Flood Insurance Program): Provides insurance to help reduce the socia-economic impact of flood. Congress established NFIP under the National Flood Insurance Act of 1968.

Flood Insurance Rate Maps (FIRMs): Maps used by lenders to determine properties in high-risk flood areas, designated Special Flood Hazard Area (SFHA).

FDPA (Flood Disaster Protection Act of 1973): Provides penalties for lender violations of mandatory flood purchase requirements, escrow requirements, notice requirements and force placement requirements for up to $2,000 per violation.

Biggert-Waters Reform Act: This Act states that an institution may force place and charge for insurance beginning on the date on which flood insurance coverage lapsed or did not provide a sufficient coverage amount.

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About Newbold

Newbold Advisors, LLC is a consulting and professional services company serving institutional clients in the private and public sectors.

The firm’s mission is to deploy qualified people at competitive rates to achieve tangible results. Our goal is to earn every client’s trust by delivering results with integrity.

Headquarters Office

25400 US 19 N. #124
Clearwater, Florida 33763
info@newboldadvisors.com
(727) 535-2102

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