Transcript W7 - NFIPiService.com

Evidence of NFIP Flood
Insurance and Documenting
Grandfathering
Agenda
Introductions
Overview
Lender Perspective
GSE Perspective
Agency Perspective
WYO Perspective
FEMA Perspective
Future Possibilities
Summary
Questions
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NFC 2010 Workshop | Apr. 12, 2010 | San Diego, CA
Introductions
Our Panelists
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Lauri Lydecker – People’s United Bank
Bob Cope – Freddie Mac
Debbie Freeman – Gambrell & Sturges LLC
Patricia Latshaw – American Bankers Insurance
Company of FL
• Barry Thomas – State Farm Insurance
• Tuula Young – FEMA/NFIP
• Linda Mackey – IIABA
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Overview
Evidence of NFIP Flood Insurance and
Documenting NFIP Grandfathering Eligibility
• The necessary evidence of NFIP flood insurance
raises many questions.
• We’ll be discussing the current options, plus some
possibilities for the future.
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Lender Perspective
What defines acceptable evidence for lenders?
• Mandatory Purchase of Flood Insurance Guidelines (pg 26),
– Flood Insurance Application and premium payment, or
– Declarations Page
– Specifically excludes Binders and Certificates of Insurance
• Very few lenders or regulators are familiar with the Flood
Insurance Manual or its 2008 amendment regarding Certificates.
• Interagency Q&As Regarding Flood Insurance
– Grandfather Rule eligibility must be substantiated (Question
#71)
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Lender Perspective
Lender Challenges
• Regulator scrutiny and fines
– Over $4,900,000 in regulator penalties since Katrina*
• Loan officer knowledge of the flood law and NFIP
– Program complexities
– Requests for RCBAP to reflect lender, in error
– Balance between a customer service focus and
regulatory compliance
* Per BankersOnline.com “Flood Penalties Watch”
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Lender Perspective
Lender Challenges
• Agent knowledge of the flood law and NFIP
– 434,800 insurance agents*
– Unfamiliarity with FEMA’s April 2008 letter W-08021
– Claims of Grandfather Rule eligibility without support
– Certificates of Insurance with unreliable information
* Per the Bureau of Labor Statistics – 2008
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Government Sponsored Entity
Perspective
Freddie Mac Best Practices
• Current evidence of flood insurance via a copy of the
insurance declaration page. The declaration page should
include the following key data elements:
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Address of the property insured
Name of borrower insured (if not a condominium policy)
Effective dates of the policy coverage period
Amount of coverage on the structure
Deductible amount on the structure
Replacement cost would be nice, but is
typically not a data element provided
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Government Sponsored Entity
Perspective
Freddie Mac Best Practices - Condos
• Number of units in the complex (or each building if buildings are
insured separately)
• Amount of coverage per building if coverage is so structured
• Replacement cost value (by building or complex) based on how
coverage is structured
• The original flood zone determination form used at origination to
determine the plotting of the property and if insurance is
required. If a subsequent FZD was performed, that determination
will be needed as well.
• Evidence of the current unpaid principal balance (UPB) of the
loan. This is normally provided as a "screen
shot" from the Lender's servicing system.
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Government Sponsored Entity
Perspective
Freddie Mac Remediation of
Noncompliance Issues
• If the noncompliance issue results from the testing of
individual loans and results in inadequate coverage,
lapsed, or non-existing coverage, the Servicer will be
required to obtain and provide evidence that insurance
has been obtained (either by the borrower or the
Servicer) to bring the coverage in line with our
requirements.
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Insurance Agency Perspective
Agency Lender - Coordination
• Basic Premise
– Majority of agents want to provide correct info 1st time.
– Most lenders want to resolve documentation 1st time.
• Property Insurance Appraisal Information
– Often Available. Ask agency for copies.
• Lenders need to centralize information gathering
– At least 3 have different processing centers for Flood & Hazard
– Currently require borrowers/agents to provide 2 COIs
– Need to share information not ask for duplicate COIs
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Insurance Agency Perspective
Agency Lender - Coordination
• Lender/Agency Liaison needed at processing centers
– Resolve issues when COIs have been sent 3+ times
• Technology system updates
– Need ability to identify & update all condo unit owners at one time.
– Large commercial properties often have multiple carriers; need ability to
document multiple property/flood carriers.
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WYO Perspective
The WYO Company – How can they help?
• Acceptable Evidence of Flood Insurance
– Declarations Page
• Grandfathering
– New Business: Provided on Declarations Page – Yes/No
– Existing Business: Update declarations page to show
Grandfathering if supporting documentation is in file for
“built in compliance” or “continuous coverage”
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FEMA Perspective
FEMA Concerns
• Incorrect forms used
• Unit owner’s lender insisting to be added as a
mortgagee on the RCBAP
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FEMA Perspective
FEMA Concerns
• Incorrect information on Certificates of Property
Insurance inadvertently misrepresenting the NFIP
coverage.
– Misleading because a Certificate of Property Insurance
is only information about the coverage at that point in
time and is not binding.
– Information on a Certificate of Property Insurance must
mirror the information on the declarations page, but
often does not.
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FEMA Perspective
Given these problems, FEMA is considering
• Removal of the optional use of Certificates at NFIP
policy renewal and accept only the use of copies of
the Declarations Page or copies of the SFIP
application and proof of payment;
or
• Keeping Certificates available “at renewal” with
conditions to assist all the stakeholders.
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FEMA Perspective
Possible Conditions
• Certificates of Property Insurance, mirroring the
information on the applicable NFIP Declarations Page
– Must include:
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Insured’s name and address;
Location;
Mortgagee;
Policy Number;
Policy Form (PRP, GP, DP,
RCBAP, GFIP);
• Policy Term;
• Coverage A &/or B Limits;
• Deductibles;
• Flood Hazard Zone;
• NFIP Grandfathering – Yes/No
(documentation required);
• Annual Premium
• If an RCBAP:
– the number of units; and
– Building RCV
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Future Possibilities
ACORD Workgroup
• Drafting an Evidence of
Flood Insurance form –
ACORD 29
• Why?
• When?
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Future Possibilities
Optional Use
• Certificates of Property Insurance “at NFIP policy
renewal” as a matter of information (a snapshot) of
what the coverage is on the date the Certificate is
completed.
– The insured or mortgagee may require a copy of the policy
Declaration Page at policy renewal since Certificates of
Property Insurance do not bind coverage under the NFIP.
– The Certificate of Liability is not acceptable for the NFIP
policies.
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Summary
Evidence of NFIP Flood Insurance and
Documenting NFIP Grandfathering Eligibility
Properly documenting evidence of flood insurance is a
key component of a lender’s compliance obligations.
Our discussion has reviewed the current options
available to lenders, plus some possibilities for the
future.
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Questions
Open Forum
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