Forced Place Insurance

Forced place insurance refers to insurance taken out by a bank or creditor on uninsured debtor’s behalf on a property placed as collateral. In case the property is damaged, funding is available to repair it. This type of insurance is most common with flood insurance; the flood insurance regulations of each agency provide notification procedures that should be followed. Forced place insurance can also be purchased for other hazards also.

Guidelines:
• Forced place hazard/flood insurance is general liability insurance for residential and commercial properties and foreclosed properties. It can also cover vacant properties, mobile homes, town houses and condominiums.
• Forced place insurance is a proven hazard insurance program. It has been designed specifically for mortgage lenders and services.
• It provides insurance cover to protect the mortgage collateral against fire and such like property hazards. However, it is most common with flood insurance.


Avoiding Lawsuits:
• The power to force place should be included in the contract note when taking out the mortgage. This will save you a lot of trouble later and prevent lawsuits against lenders placing insurance. The powers and obligations should be spelt out clearly in the loan contract note at the outset.
• If the lender has force placed insurance, do not pass on the charge to the customer that is greater than the actual cost of the insurance. It amounts to retaining a commission, which is liable for litigation.
• If a lender force places hazard insurance, the policy and disclosure letter should be made known to state.
• Insurance procured by the lender for whatever reason and that is not reflected in lender’s record, is also a strong case for later litigation.
• There are laws regulating force placed insurance in Connecticut, New Mexico, Florida, New York, Hawaii, Tennessee, Maryland, Texas and Mississippi.



Insurance cover for fire handling for vacant and foreclosed properties is very expensive and can create servicing burden. Loans made on properties located in federally designated flood zones too prove to be expensive and cause difficulty to bank’s loan servicing department. The federal flood tracking regulations for these types of loans are now imposed on the lender, thus increasing the mortgage premium considerably.

Solution Offered by FSIA, Inc. The firm offers a Forced Placed Property/Liability/Flood program that claims to provide maximum protection with the least hassles. The program has some outstanding features that include:

• Instant binding authority for occupied and vacant properties, residential or commercial
• Competitive rates and no minimum premium or deposits
• Flexible monthly billing
• Flood zone determinations.
• Flood insurance quoting and placement programs.
• Flood insurance tracking.