Believe it or not, a servicer cannot just add force-placed insurance to your mortgage loan account without following a specific protocol as set out in Regulation X of the Real Estate Settlement Procedures Act (12 C.F.R. 1024.37).
What is force-placed insurance ("FPI")? It means "hazard insurance obtained by a servicer on behalf of the owner or assignee of the mortgage loan that insures the property securing the loan. See 12 C.F.R. 1024.37(a).
The servicer cannot impose FPI premium fee unless it has a reasonable basis to believe that the borrower has failed to comply with the loan's requirement to maintain hazard insurance. See 12 C.F.R. 1024.37(b).
Before imposing a FPI premium fee, the servicer must:
NOTE: Notice #2 cannot be sent to the borrower until at least 30 days after Notice #1 was sent. Notice #2 must be sent at least 15 days before the FPI premium fee is imposed.
Notice #1 - Initial notice. Must state:
Notice #2 - Reminder notice. Must state:
See 12 C.F.R. 1024.37(d)(2)
Within 15 days of receiving proof that the borrower has had in place hazard insurance that is in compliance with the loan's requirements, the servicer mustcancel the FPI and refund all FPI premiums paid (along with related fees) for any period of overlapping insurance coverage. See 12 C.F.R. 1024.37(g)
All FPI premiums imposed must be bona fide and reasonable. See 12 C.F.R. 1024.37(h)
Please visit http://www.ecfr.gov/cgi-bin/text-idx?SID=200b5b30c6af3b5d1904e1f5d45378fc&node=se12.8.1024_137&rgn=div8 for additional information and provisions.