Mortgage servicer requirements on forced-placed insurance have been updated by the Federal National Mortgage Association. Acceptable costs and carriers are addressed.
Fannie Mae is making the updates so that its own requirements are in line with the Consumer Financial Protection Bureau’s definition for lender-placed insurance.
The requirements impact lender-placed insurance on all of the Washington, D.C.-based secondary lender’s residential loans, including reverse mortgages.
Fannie covered the requirements in Servicing Guide Announcement SVC-2013-27.
Companies affiliated with the servicer cannot issue lender-placed insurance policies on Fannie loans. This includes captive insurance or reinsurance arrangements with an affiliated entity.
In addition to entities owned or controlled, in whole or in part, by the servicer, affiliates include entities that own or control the servicer and entities with common ownership or control with the servicer.
Publicly traded companies where the servicer owns less than 5 percent of the shares are not considered affiliates.
Premiums charged to the borrower or reimbursed by Fannie must exclude commission payments earned by the servicer, broker or any affiliated entity.
Commissions include bonuses, fees or other types of payments such as underwriting bonuses or other payments based on insurance loss ratios.
A certification will be required by servicers that they complied with Fannie’s requirements for acceptable lender-placed insurance costs and carriers.
When servicers don’t complete the certification, Fannie could exercise its right to offset, decline to reimburse advances for lender-placed insurance premiums or take another action as permitted under the servicer’s mortgage selling and servicing contract and the Fannie Mae Servicing Guide.
Servicers are required to provide copies of lender-placed insurance policies, including any other contractual arrangements with lender-placed insurance carriers, as well as other documentation within 30 days of Fannie’s request.
Servicers have until June 1, 2014, to implement the requirements — though they are encouraged to move sooner. Master agreements with lender-placed insurance providers need to comply with the revised requirements by the deadline.
