Hurricane Season is Here!
Is Your Flood Insurance Program Prepared?

Hurricanes are a major cause of flooding resulting in property loss.

In an expansion of federal legislation enacted in 1968 and 1973, the National Flood Insurance Reform Act of 1994 mandates forced placement of flood insurance when (1) a property is located in a designated Standard Flood Hazard Area and (2) the borrower fails to provide necessary coverage.

Most mortgage servicers are aware of their responsibility to track and determine if a borrower is maintaining required flood insurance. When a borrower fails to comply, the lender or mortgage servicer must follow the Mandatory Purchase of Flood Insurance Guidelines. Civil penalties up to $100,000 per year may be imposed for lender non-compliance.

Making, increasing, extending, or renewing any loan secured by improved real estate serves as the trigger for compliance with the Mandatory Purchase of Flood Insurance Guidelines. These require lenders to:

To meet the required 45-day borrower notification requirement, a notification letter must be sent to the borrower requesting evidence of appropriate flood insurance. If the borrower does not provide this evidence, coverage can then be lender placed at the borrower’s expense. The notification letters must include:

Under Federal rules, lender-placed insurance coverage must be equal to the lesser of outstanding principal balance, insurable value or maximum National Flood Insurance Program (NFIP) allowable. (Current maximum NFIP coverage levels are $250,000 for residential properties and $500,000 for non-residential properties.)

On July 21, 2009, the Federal Agencies issued the final revision of the “Interagency Questions and Answers” regarding flood insurance. The 2009 publication, which supersedes the 1997 version, supplements other guidance or interpretations issued by the Agencies and FEMA.

While 77 of the 82 questions have been finalized and will become effective September 21, 2009, 5 questions remain open for comment -- 3 of which concern lender-placed insurance issues as follows:

While question (62.) is not among those finalized, some regulators have reportedly already begun advising lenders that force-placed premium cannot be charged to a borrower until 45 days after the required notification date. Comments on this and all other open questions and answers must be submitted on or before September 21, 2009.

Proctor Financial's Bridge60® program allows the lender to choose the effective date of coverage. Many lenders have chosen to make coverage effective on the date the previous policy expired. With the clarification provided in the Interagency Questions, this method is not considered to be compliant with the regulations. Proctor Financial will be notifying our clients of options in the Bridge60® program to insure for any "gap" in coverage that may occur due to this clarification. We will communicate with our clients in an email within the next 30 days of our program enhancements.

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The Red Flag Rules:
Implementation Delayed One More Time, Are You Ready?

On April 30, 2009, the Federal Trade Commission issued yet another extension for enforcement of The Red Flag Rules mandated by Congress as part of the Fair and Accurate Credit Transactions (FACT) Act of 2003. The purpose of the rules is to detect, prevent, and mitigate instances of identity theft. The rules require development, implementation, and continual administration of an Identity Theft Prevention program.

The FTC discovered that much uncertainty remained about what types of businesses are covered and how affected financial institutions should develop identity theft prevention programs specific to their line of business. In light of these concerns, the FTC has extended the implementation deadline from August 1, 2009 to November 1, 2009. This extension has been given, so that financial institutions have more time to ask questions and implement an appropriate program.

Six federal agencies have joined in issuing a set of frequently asked questions (FAQs) to help financial institutions, creditors, users of consumer reports, and issuers of credit cards and debit cards comply with federal regulations on identity theft and discrepancies in changes of address. To view these FAQ’s, go to Current Events in the Compliance Resources section of PFI’s Web site at www.pfic.com or click here. You may also wish to review Proctor Financial Inc.’s Red Flag Policy, which is located in the Compliance Resources section under Library Resources/Proctor Financial Inc. Documents or click here.

Hopefully, your financial institution is on track for the November 1, 2009, deadline or you already have a program in place as there are heavy fines associated with non-compliance.

Customer Service Spotlight Falls on MaryAnn Bott

PFI is known for its “customer first” philosophy -- an approach that Mary Ann Bott strongly believes in and puts to work every day for PFI clients. In recognition of her outstanding customer service, Mary Ann has been named recipient of PFI’s Employee of the Quarter award.

Mary Ann has been a key contributor to PFI’s customer service success since joining the company in 2000. As lead contact for client accounts, her team handles all processing of daily mail as well as updates to the mortgage servicing systems. Mary Ann is also responsible for processing client flood documents and assisting with flood audits. In addition, she helps the Customer Service department respond to client questions and information requests. Mary Ann’s enthusiasm and customer dedication have made her a valuable client asset and earned her a well deserved place among PFI’s “Best of the Best.”

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USDA/RD and PFI Strengthen Services to Low-Income Homeowners

By Toni Carter, USDA/RD Branch Chief

USDA/Rural Development administers programs for low-income housing customers, including approximately 317,000 customers in the Single Family Housing (SFH) Direct program and 225,000 customers (15,100 properties) in the Multi-family Housing program. USDA/RD assists these customers through subsidy when customers’ income warrants assistance. USDA/RD also administers loan guarantees and other special servicing products to meet various customer needs.

PFI has been a vendor for the USDA since 1998 providing lender-placed insurance tracking and placement services in the continental United States, Puerto Rico, and the Virgin Islands. These services enable USDA/RD to place insurance on borrowers when necessary to secure the asset.

By partnering with PFI, USDA/RD has shifted property loss risk from the taxpayer to an insurance company with PFI as the procuring agent. PFI has also made a Homeowners’ Insurance Program available to assist USDA/RD in successfully graduating their customers to the private sector.

PFI’s role was recently expanded to include flood determination service allowing USDA/ RD to shift resources into the loan making arena, so that more citizens can get loans and move on to success as a homeowner. In addition, lender-placed claims will now be processed at PFI for effective claims cost containment. Lender-placed insurance provided by PFI has enabled USDA/RD customers with property located in an SFHA to gain insurance in the private market where there were previously gaps in coverage.

I truly enjoyed my recent visit to PFI. It was gratifying to interact with committed, knowledgeable people as we participated in a joint PFI/USDA/RD training program. I was particularly impressed with the group’s ability -- while fresh pizza called from the back of the room -- to focus on the USDA/RD training overview I was able to share.

While visiting with my PFI colleagues, I was asked about when conditions in the housing market might show signs of improvement. In my view, continuing high unemployment stands in the way of a housing market recovery. Further, I feel that supply must be taken off the market by eliminating “blight” properties and graduating people to safe, decent, and affordable housing. Supply must be removed from the higher end as well. Some markets simply have many more “million dollar” homes than projected demand will support. Of course, this is not official Government position, just my opinion.

From what I have observed, when conditions do improve, PFI will be ready. I have seen real progress in PFI’s ability to gain ground in a market that is highly automated and dominated by a handful of vendors. I envision PFI gaining additional market share with strategic initiatives to bring new technologies and more automation to the forefront. When the market resumes its role in a revitalized economy, I expect PFI to be in the midst of the industry’s forward momentum achieving even greater success as PFI moves into the future.

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ValueNOW Delivers Fast, Accurate Replacement Cost Calculations

Lender-placed insurance that covers properties at market value or outstanding loan balance will not protect the investor nor lender in the event of a total loss. Only coverage based on full replacement cost value can provide this level of protection.

ValueNOW, a new Web based service available to PFI clients, helps address this need by providing a quick and easy way to establish the replacement cost value on residential properties, including 1-4 single family dwellings and town-house style condominiums. Commercial properties, including garden style condominiums, will be part of the ValueNOW service starting in the third quarter of 2009.

The ValueNOW Replacement Cost Calculator is bundled with PFI’s Mortgage Guard® − lender-placed hazard insurance program, which includes a Replacement Cost Guarantee and Inflation Guard endorsement − providing a complete, fully integrated insurance solution.

The ValueNOW property valuation tool is accessible 24/7 through the secure client portal on PFI’s Web site at www.pfic.com. To activate ValueNOW,, users login using a dedicated username and password then enter a property address. ValueNOW, integrates public record data from 3 national providers to produce comprehensive property valuation reports. Searches can be refined using data override and normalization functionality to include personal knowledge of the property.

Effective multi-source validation has been built into the ValueNOW, tool. Data and confidence scoring helps the users determine if data results from various sources match while satellite and aerial imagery, as well as advanced GeoCode and measurement tools, provide quick and accurate identification of subject property.

Users are charged a nominal fee per calculation. No charge is made for calculations where public records are incomplete nor unavailable. The tool can be used for a single property and also accommodates batch processing of 500 or more properties.

To learn more about our ValueNOW service, e-mail us at proctorsolutions@pfic.com
or call toll-free (877) 456-7294.

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Call Center Best Practices

Best practices for call center operations were highlighted during a recent panel discussion led by William Fricke, Jr., Vice President and Senior Analyst, for Moody’s Investor Service. Fricke pointed out that an effective call center operation can play an important role in mitigating a servicer’s risk of negative media or governmental attention.

According to Fricke, application of cutting edge technology and intelligent benchmarking provide a strong foundation for optimizing call center operations. Some of the best practices outlined include the following:

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Did You Know?