Lender Placed Hazard and Flood

Lender Placed Hazard and Flood coverage, often called Force Place or Forced Place insurance is purchased by lenders to protect their collateral interests in real property:

  • When they become aware of insurance lapses on an active mortgage loan.
  • After a borrower’s real property is acquired through foreclosure.

 

Both events require immediate response. The J. B. Lloyd & Associates proprietary lender placed insurance program provides you instant coverage under a master policy. A simple online reporting entry registers any property and our Errors and Omissions coverage is available to protect you in the event of an inadvertent reporting failure.

You also enjoy automatic coverage during the “letter cycle,” that period in which the lender formally informs the borrower that tracking indicates an apparent insurance lapse and demands evidence that coverage has been replaced. If a property is in fact uninsured during this cycle, your J. B. Lloyd coverage will be backdated to the date of the borrower’s lapse of insurance, protecting you in the event of a claim.

With foreclosures on the rise lender placed coverage has never been more relevant. Increasing policy lapses underscore the need for immediate replacement of coverage to protect the lender’s mortgage interest, so this coverage is a necessary part of the Risk Control Plan for any mortgage lender or purchaser of distressed loan assets (Real Estate Owned or REO).

SPECIAL NOTE TO OUR FORCE PLACE CLIENTS:

If you’ve followed with concern the Force Place insurance flap outlined in a recent AMERICAN BANKER article, this message should provide some relief.

The article targeted large lenders, alleging high rates, over-insuring, backdating, and “kickbacks” to those lenders by insurance companies who provide Force Place coverage. These provide plums for bank bashers, consumer advocates and politicians in need of issues. J. B. Lloyd & Associates, LLC, however, specializes in the “community bank” category, to which you belong, and our transactions differ markedly.

  • Force Place rates will always exceed standard, as our underwriters cover all properties regardless of condition. But your rates with us average 1-1.2%, versus samples as high as 2% through the big banks and their underwriters.
  • In one Dallas case the large bank force placed coverage on a dwelling for $140,000, when the appraised value was $103,000 and the loan balance was $102,000. That borrower paid a high rate for over insurance. The J. B. Lloyd policy insures for either the loan balance or the last known amount of insurance, which would normally be Replacement Cost.
  • To assure continuous coverage Force Place protection from J. B. Lloyd is sometimes “backdated” for a matter of days or weeks to the date the borrower’s coverage lapsed, but it does not duplicate or double bill him for coverage. AMERICAN BANKER cited a case in which coverage was backdated for nine months.
  • Some banks may own insurance agencies, and it would be reasonable to pay that agency a commission for force place transactions. But the effective commission in AMERICAN BANKER is 21.5%, roughly double that of agents in the community bank marketplace. Paying even high commissions to licensed agents is legal, but kickbacks to lenders constitute illicit payments.

 

An insurance agency can no more guarantee you immunity from political damage than fire or hail, but we do pledge to continue operating in a way that minimizes your risk from all these perils. We appreciate your continued support.