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Flood Insurance Reform Act of 2011 could affect forced placed insurance program

Proctor Financial, Inc. is keeping track of various proposed legislation, including the H.R. 1309: Flood Insurance Reform Act of 2011. In general, the bill provides for a 5-year extension of the National Flood Insurance Program (NFIP), phases out some rate subsidies, raises premiums and also addresses force placed flood insurance.

The bill, as originally proposed, amends the Flood Disaster Protection Act of 1973 to include termination procedures for force placed insurance. The bill provides that the lender, within 30 days of receipt of the  borrower´s existing flood insurance coverage, must terminate forced placed insurance coverage and refund to the borrower all force placed premiums paid by the borrower during any period the borrower´s flood insurance coverage was in place.

The bill also provides that a declarations page which includes the existing flood insurance policy number and the identity of, and contact information for, the insurance company or agent are considered “sufficiency of demonstration” of flood insurance coverage.

The bill was recently amended in session to address the 45 day notice period between the time the borrower´s coverage has lapsed and the time lender force places insurance.

It appears that if the bill is passed in its current form, the lender will be able to charge the borrower for force placed coverage during the mandatory 45 day notice period. The amendment was only done by voice.

The actual language is still be drafted and will likely undergo much revision during the legislative process, but PFI would like our clients to be aware that these important issues are being debated in Congress.

The following is a link to the original version of the bill, which does not reflect the voice amendment.