Ten days after sending a force-placement notice, a servicer buys coverage because the borrower has not yet responded. Which statement is most accurate?
Correct Answer
D) The servicer may obtain interim protection, but mandatory force placement is required if adequate coverage is still absent after the 45-day notice period
Why this is correct: The correct answer is "The servicer may obtain interim protection, but mandatory force placement is required if adequate coverage is still absent after the 45-day notice period." Under flood insurance rules, the 45-day notice period is the borrower's opportunity to obtain adequate coverage. However, the regulation does not prohibit the servicer from protecting its collateral interest during this period. The servicer may purchase interim coverage, but if the borrower still fails to obtain adequate coverage by the end of the 45-day period, the servicer must proceed with mandatory force placement of insurance. Why the other choices are wrong: "The servicer may never protect its collateral during the notice period" is wrong because regulations do not forbid a lender from obtaining interim coverage to protect its interest. "The borrower automatically receives free coverage" is incorrect; force-placed coverage is charged to the borrower, not provided for free. "The loan must be forgiven" is false; a lapse in flood insurance does not trigger loan forgiveness. Exam tip: Remember the 45-day notice period is for the borrower to act, but the servicer can act sooner to protect the collateral, subject to charging and refund rules.
Why This Is the Correct Answer
Why this is correct: The correct answer is "The servicer may obtain interim protection, but mandatory force placement is required if adequate coverage is still absent after the 45-day notice period." Under flood insurance rules, the 45-day notice period is the borrower's opportunity to obtain adequate coverage. However, the regulation does not prohibit the servicer from protecting its collateral interest during this period. The servicer may purchase interim coverage, but if the borrower still fails to obtain adequate coverage by the end of the 45-day period, the servicer must proceed with mandatory force placement of insurance. Why the other choices are wrong: "The servicer may never protect its collateral during the notice period" is wrong because regulations do not forbid a lender from obtaining interim coverage to protect its interest. "The borrower automatically receives free coverage" is incorrect; force-placed coverage is charged to the borrower, not provided for free. "The loan must be forgiven" is false; a lapse in flood insurance does not trigger loan forgiveness. Exam tip: Remember the 45-day notice period is for the borrower to act, but the servicer can act sooner to protect the collateral, subject to charging and refund rules.
More Federal Laws Questions
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Before the team acts on a production meeting, a training manager must address SCRA Interest Rate Cap. Which response is most defensible?
Before the team acts on a production meeting, the MLO must address FCRA Adverse Action Notice. Which response is most defensible?
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During a disclosure desk review, the loan team encounters an RESPA Servicing Transfer issue. Which response should avoid a shortcut that would misapply the rule?
A mortgage team asks a quality-control reviewer about TRID Loan Estimate timing during a record-retention audit. Which answer should guide the file?
A mortgage team asks a branch supervisor about TILA APR and finance-charge rules during a renewal checklist. Which answer should guide the file?
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An MLO is reviewing procedures for a case where a compliance analyst asks why covered mortgage application data is collected. What is the proper handling?
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