An Interagency Outlook Live Webinar discussing the latest regulatory updates on Flood Insurance was presented on October 22nd. The focus was recent and upcoming changes, but the webinar closed with a Q&A that provided some insight into existing and long-standing requirements and restrictions as well.
A few that stood out include:
1. The Small Lender exception to the escrow requirement should generally be available (assuming other requirements are met) IF on or before July 6, 2012:
a. You set up escrows to comply with the Higher-Priced Mortgage Loan (HPML) requirements; or,
b. You collected escrow funds for a third party, but didn’t set up an individual escrow account or service the loan.
2. For banks subject to the escrow requirement:
a. If you will rely on a loan “type” exception that could later expire, make sure your loan documents allow you to set up an escrow account;
b. You will also need to escrow for any force-placed flood insurance; and,
c. An all-in-one construction/permanent loan (i.e. one closing) does not qualify as an exception to the escrow requirement, even if the construction phase is 12 months or less.
3. The regulation allows you to close a loan with force-placed insurance.
We have to admit we learned a few things during this webinar. Check out our November newsletter for more details on our takeaways from this webinar.