THE BASIS POINT

Post Sandy Flood Insurance Notes For Homeowners, Lenders

Post Sandy, lenders must obtain disaster inspection reports for all the properties in declared disaster areas. A Norcom Mortgage exec wrote that:

The head of the new ValueQuest AMC, Eli Pascon, made a decision to complete disaster inspection reports at cost to the company – an effort on their part that strains their time and resources so it really is great they can save money for those borrowers when they could be charging.” The bulletin said, “We have decided since counties in southern Connecticut were deemed disaster zones we would do our part to help out. Knowing that appraisers were busy, we put together a task force to visit each property that had an appraisal done in the last 60 days (prior to the storm). Our task force was down in southern CT the day after the storm and took pictures of the properties to confirm if any damage was sustained from Hurricane Sandy. ValueQuest chose to not charge the borrowers for this service since most had suffered losses already. Under any other Appraisal Management Company, the lender would have had to order a Disaster Inspection Report from the appraiser at the borrower’s expense and be subjected to waiting for the appraiser to fit it into their schedule. We at ValueQuest understand that ‘time is of the essence’ and any delay in the closing may end up costing the borrower more.

For more information on this AMC visit www.valuequestamc.com.

And as for homeowners, the U.S. Department of Homeland Security issued a Service Bulletin regarding the National Flood Insurance Program (NFIP). The memorandum outlines the provisions for homeowners to quality for an extension of the grace period for payment of National Flood Insurance renewal premiums. Did you know that the Department of Homeland Security, through FEMA, leads the federal response to Hurricane Sandy? I didn’t – shows how up on things I am. But here is the site.

Then let’s not forget the Biggert-Waters Flood Insurance Reform Act of 2012, signed in July.

The Act increases access to the NFIP for some residents whose homes were impacted by flooding from federal land that resulted from wildfire. The Act authorizes the NFIP and it’s financing through September 2017. The Act impacts lenders in many areas. For example, it requires that lenders provide to all purchasers a disclosure of the availability of flood insurance under the Real Estate Settlement Procedures Act (RESPA). The Act increased penalties for lenders that fail to ensure that properties required to have flood coverage purchase such coverage. Penalties were increased from $350 to $2000 per violation, and there is no limit on annual penalties. The Act requires lending institutions to create escrow accounts for the payment of flood insurance premiums.

But wait, there’s more! Termination of force-placed Insurance: within 30 days of receipt by a lender or servicer of confirmation of a borrower’s existing flood insurance coverage, the lender or servicer shall terminate any force-placed insurance and refund all force-placed insurance premiums and fees charged to the borrower during any period of coverage overlap. For confirmation of coverage, a lender or servicer shall accept the borrower’s insurance policy declarations page that includes the flood policy number and the insurance company. The Act increased the annual limitation on premium increase from 10% to 20%, and permits lending institutions to accept a private primary flood insurance policy in lieu of a NFIP flood policy to satisfy the mandatory purchase requirements. Lastly, it clarified that condominium owners with flood insurance policies should receive claims payments regardless of the adequacy of flood insurance coverage of the condominium association and other condominium owners.
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Also See:
Mortgage & Insurance Help Post Sandy