(a) Definition
of force-placed insurance.
(1) In general. For the purposes of this section, the term “force-placed insurance”
means hazard insurance obtained by a servicer on behalf of the owner
or assignee of a mortgage loan that insures the property securing
such loan.
(2) Types of insurance not considered force-placed
insurance. The following insurance does not constitute “force-placed
insurance” under this section:
(i) Hazard insurance required by the
Flood Disaster Protection Act of 1973.
(ii) Hazard insurance obtained by a
borrower but renewed by the borrower’s servicer as described in section
1024.17(k)(1), (2), or (5).
(iii)
Hazard insurance obtained by a borrower but renewed by the borrower’s
servicer at its discretion, if the borrower agrees.
(b) Basis for charging borrower
for force-placed insurance. A servicer may not assess on a borrower
a premium charge or fee related to force-placed insurance unless the
servicer has a reasonable basis to believe that the borrower has failed
to comply with the mortgage loan contract’s requirement to maintain
hazard insurance.
(c) Requirements
before charging borrower for force-placed insurance.
(1) In general. Before a servicer assesses on a borrower any premium charge or fee
related to force-placed insurance, the servicer must:
(i) Deliver to a borrower or place
in the mail a written notice containing the information required by
paragraph (c)(2) of this section at least 45 days before a servicer
assesses on a borrower such charge or fee;
(ii) Deliver to the borrower or place
in the mail a written notice in accordance with paragraph (d)(1) of
this section; and
(iii) By the
end of the 15-day period beginning on the date the written notice
described in paragraph (c)(1)(ii) of this section was delivered to
the borrower or placed in the mail, not have received, from the borrower
or otherwise, evidence demonstrating that the borrower has had in
place, continuously, hazard insurance coverage that complies with
the loan contract’s requirements to maintain hazard insurance.
(2) Content of notice. The notice required
by paragraph (c)(1)(i) of this section shall set forth the following
information:
(i)
The date of the notice;
(ii)
The servicer’s name and mailing address;
(iii) The borrower’s name and mailing
address;
(iv) A statement that
requests the borrower to provide hazard insurance information for
the borrower’s property and identifies the property by its physical
address;
(v) A statement that:
(A) The borrower’s hazard
insurance is expiring, has expired, or provides insufficient coverage,
as applicable;
(B) The servicer does
not have evidence that the borrower has hazard insurance coverage
past the expiration date or evidence that the borrower has hazard
insurance that provides sufficient coverage, as applicable; and
(C) If applicable, identifies the type
of hazard insurance for which the servicer lacks evidence of coverage;
(vi) A statement
that hazard insurance is required on the borrower’s property, and
that the servicer has purchased or will purchase, as applicable, such
insurance at the borrower’s expense;
(vii) A statement requesting the borrower
to promptly provide the servicer with insurance information;
(viii) A description of the requested
insurance information and how the borrower may provide such information,
and if applicable, a statement that the requested information must
be in writing;
(ix) A statement
that insurance the servicer has purchased or purchases:
(A) May cost significantly more than hazard
insurance purchased by the borrower;
(B) Not provide as much coverage as hazard insurance purchased by
the borrower;
(x) The servicer’s telephone number for borrower inquiries; and
(xi) If applicable, a statement
advising the borrower to review additional information provided in
the same transmittal.
(3) Format. A servicer must set the
information required by paragraphs (c)(2)(iv), (vi), and (ix)(A) and
(B) in bold text, except that the information about the physical address
of the borrower’s property required by paragraph (c)(2)(iv) of this
section may be set in regular text. A servicer may use form MS-3A
in appendix MS-3 of this part to comply with the requirements of paragraphs
(c)(1)(i) and (2) of this section.
(4) Additional information. Except
for the mortgage loan account number, a servicer may not include any
information other than information required by paragraph (c)(2) of
this section in the written notice required by paragraph (c)(1)(i)
of this section. However, a servicer may provide such additional information
to a borrower on separate pieces of paper in the same transmittal.
(d) Reminder notice.
(1) In general. The notice required by paragraph
(c)(1)(ii) of this section shall be delivered to the borrower or placed
in the mail at least 15 days before a servicer assesses on a borrower
a premium charge or fee related to force-placed insurance. A servicer
may not deliver to a borrower or place in the mail the notice required
by paragraph (c)(1)(ii) of this section until at least 30 days after
delivering to the borrower or placing in the mail the written notice
required by paragraph (c)(1)(i) of this section.
(2) Content of
the reminder notice.
(i) Servicer
receiving no insurance information. A servicer that receives
no hazard insurance information after delivering to the borrower or
placing in the mail the notice required by paragraph (c)(1)(i) of
this section must set forth in the notice required by paragraph (c)(1)(ii)
of this section:
(A)
The date of the notice;
(B) A statement
that the notice is the second and final notice;
(C) The information required by paragraphs
(c)(2)(ii) through (xi) of this section; and
(D) The cost of the force-placed insurance,
stated as an annual premium, except if a servicer does not know the
cost of force-placed insurance, a reasonable estimate shall be disclosed
and identified as such.
(ii) Servicer
lacking evidence of continuous coverage. A servicer that has
received hazard insurance information after delivering to a borrower
or placing in the mail the notice required by paragraph (c)(1)(i)
of this section, but has not received, from the borrower or otherwise,
evidence demonstrating that the borrower has had sufficient hazard
insurance coverage in place continuously, must set forth in the notice
required by paragraph (c)(1)(ii) of this section the following information:
(A) The date of the notice;
(B) The information required by paragraphs
(c)(2)(ii) through (iv) and (ix) through (xi) and (d)(2)(i)(B) and
(D) of this section;
(C) A statement
that the servicer has received the hazard insurance information that
the borrower provided;
(D) A statement
that requests the borrower to provide the information that is missing;
(E) A statement that the borrower will
be charged for insurance the servicer has purchased or purchases for
the period of time during which the servicer is unable to verify coverage;
(3) Format. A servicer must set the information
required by paragraphs (d)(2)(i)(B) and (D) of this section in bold
text. The requirements of paragraph (c)(3) of this section apply to
the information required by paragraph (d)(2)(i)(C) of this section.
A servicer may use form MS-3B in appendix MS-3 of this part to comply
with the requirements of paragraphs (d)(1) and (d)(2)(i) of this section.
A servicer may use form MS-3C in appendix MS-3 of this part to comply
with the requirements of paragraphs (d)(1) and (d)(2)(ii) of this
section.
(4) Additional information. Except for the borrower’s mortgage loan
account number, a servicer may not include any information other than
information required by paragraph (d)(2)(i) or (ii) of this section,
as applicable, in the written notice required by paragraph (c)(1)(ii)
of this section. However, a servicer may provide such additional information
to a borrower on separate pieces of paper in the same transmittal.
(5) Updating
notice with borrower information. If a servicer receives new
information about a borrower’s hazard insurance after a written notice
required by paragraph (c)(1)(ii) of this section has been put into
production, the servicer is not required to update such notice based
on the new information so long as the notice was put into production
a reasonable time prior to the servicer delivering the notice to the
borrower or placing the notice in the mail.
(e) Renewing or replacing force-placed insurance.
(1) In general. Before a servicer assesses
on a borrower a premium charge or fee related to renewing or replacing
existing force-placed insurance, a servicer must:
(i) Deliver to the borrower or place
in the mail a written notice containing the information set forth
in paragraph (e)(2) of this section at least 45 days before assessing
on a borrower such charge or fee; and
(ii) By the end of the 45-day period
beginning on the date the written notice required by paragraph (e)(1)(i)
of this section was delivered to the borrower or placed in the mail,
not have received, from the borrower or otherwise, evidence demonstrating
that the borrower has purchased hazard insurance coverage that complies
with the loan contract’s requirements to maintain hazard insurance.
(iii) Charging a borrower before
end of notice period. Notwithstanding paragraphs (e)(1)(i) and (ii)
of this section, if not prohibited by State or other applicable law,
if a servicer has renewed or replaced existing force-placed insurance
and receives evidence demonstrating that the borrower lacked insurance
coverage for some period of time following the expiration of the existing
force-placed insurance (including during the notice period prescribed
by paragraph (e)(1) of this section), the servicer may, promptly upon
receiving such evidence, assess on the borrower a premium charge or
fee related to renewing or replacing existing force-placed insurance
for that period of time.
(2) Content of renewal notice. The
notice required by paragraph (e)(1)(i) of this section shall set forth
the following information:
(i) The date of the notice;
(ii) The servicer’s name and mailing
address;
(iii) The borrower’s
name and mailing address;
(iv)
A statement that requests the borrower to update the hazard insurance
information for the borrower’s property and identifies the borrower’s
property by its physical address;
(v) A statement that the servicer previously purchased insurance
on the borrower’s property and assessed the cost of the insurance
to the borrower because the servicer did not have evidence that the
borrower had hazard insurance coverage for the property;
(vi) A statement that:
(A) The insurance the servicer purchased
previously has expired or is expiring, as applicable; and
(B) Because hazard insurance is required on
the borrower’s property, the servicer intends to maintain insurance
on the property by renewing or replacing the insurance it previously
purchased;
(vii)
A statement informing the borrower:
(A) That insurance the servicer purchases
may cost significantly more than hazard insurance purchased by the
borrower;
(B) That such insurance may
not provide as much coverage as hazard insurance purchased by the
borrower; and
(C) The cost of the force-placed
insurance, stated as an annual premium, except if a servicer does
not know the cost of force-placed insurance, a reasonable estimate
shall be disclosed and identified as such.
(viii) A statement that if the borrower
purchases hazard insurance, the borrower should promptly provide the
servicer with insurance information.
(ix) A description of the requested
insurance information and how the borrower may provide such information,
and if applicable, a statement that the requested information must
be in writing;
(x) The servicer’s
telephone number for borrower inquiries; and
(xi) If applicable, a statement advising
a borrower to review additional information provided in the same transmittal.
(3) Format. A servicer must set the information
required by paragraphs (e)(2)(iv), (vi)(B), and (vii)(A) through (C)
of this section in bold text, except that the information about the
physical address of the borrower’s property required by paragraph
(e)(2)(iv) may be set in regular text. A servicer may use form MS-3D
in appendix MS-3 of this part to comply with the requirements of paragraphs
(e)(1)(i) and (2) of this section.
(4) Additional information. Except
for the borrower’s mortgage loan account number, a servicer may not
include any information other than information required by paragraph
(e)(2) of this section in the written notice required by paragraph
(e)(1) of this section. However, a servicer may provide such additional
information to a borrower on separate pieces of paper in the same
transmittal.
(5) Frequency of renewal notices. Before each
anniversary of a servicer purchasing force-placed insurance on a borrower’s
property, the servicer shall deliver to the borrower or place in the
mail the written notice required by paragraph (e)(1) of this section.
A servicer is not required to provide the written notice required
by paragraph (e)(1) of this section more than once a year.
(f) Mailing the notices. If a servicer
mails a written notice required by paragraphs (c)(1)(i), (c)(1)(ii),
or (e)(1) of this section, the servicer must use a class of mail not
less than first-class mail.
(g) Cancellation
of force-placed insurance. Within 15 days of receiving, from
the borrower or otherwise, evidence demonstrating that the borrower
has had in place hazard insurance coverage that complies with the
loan contract’s requirements to maintain hazard insurance, a servicer
must:
(1) Cancel the
force-placed insurance the servicer purchased to insure the borrower’s
property; and
(2) Refund to such
borrower all force-placed insurance premium charges and related fees
paid by such borrower for any period of overlapping insurance coverage
and remove from the borrower’s account all force-placed insurance
charges and related fees for such period that the servicer has assessed
to the borrower.
(h) Limitations
on force-placed insurance charges.
(1) In general. Except for charges subject to State regulation as the business of
insurance and charges authorized by the Flood Disaster Protection
Act of 1973, all charges related to force-placed insurance assessed
to a borrower by or through the servicer must be bona fide and
reasonable.
(2) Bona fide and reasonable charge. A bona
fide and reasonable charge is a charge for a service actually
performed that bears a reasonable relationship to the servicer’s cost
of providing the service, and is not otherwise prohibited by applicable
law.
(i) Relationship to
Flood Disaster Protection Act of 1973. If permitted by regulation
under section 102(e) of the Flood Disaster Protection Act of 1973,
a servicer subject to the requirements of this section may deliver
to the borrower or place in the mail any notice required by this section
and the notice required by section 102(e) of the Flood Disaster Protection
Act of 1973 on separate pieces of paper in the same transmittal.
