Consumer complaint received 2021-12-31
Company: Flagstar Bank, N.A.
State: CT
Product: Mortgage
Sub-product: Conventional home mortgage
Issue: Trouble during payment process

Complaint:
I am now on the THIRD ROUND of trying to stop my mortgage servicer from forced-placement of flood insurance gap coverage! That is, my mortgage servicer is on its third ( separate ) effort to force me to place unneeded flood insurance. [ The mortgage is only eight months old!!! ] So, see previous complaints # XXXX & # XXXX. The following starts with the original Replacement Cost Value ( RCV ) which I sent to XXXX XXXX Mortgage to try to persuade them that my flood insurance coverage was in compliance with XXXX XXXX regulations . 

XXXX. XX/XX/XXXX : Replacement Cost Value ( RCV ) of XXXX XXXX XXXX, XXXX XXXX, MA, calculated by XXXX ( {$170000.00} ). I sent this RCV to XXXX XXXXXXXX XXXX three times as justification of the flood coverage amount I had selected, but they had ignored that document in each of the three times I sent it to them. I finally learned from XXXX XXXX XXXX that they would only recognize the RCV if the amount were cited in the Endorsements of the Policy Declarations Page of the insurance policy. XXXX revised the RCV upwards ( see below # 3 ) and put its value in the Endorsements of the Policy Declaration page ( see # 3 and # 4 below ) ). ( Of course, the key to this scam is that flood insurers DO NOT estimate RCV of properties they cover and therefore will not cite any RCV in the Endorsements of the Policy Declarations page. My solution was to have the homeowner insurer do the RCV estimate and have it cite it on the homeowners Policy Declarations page. Apparently, XXXX XXXX eventually found this to be acceptable. ) XXXX. XXXX : XXXX initial flood policy approved for mortgage closing. 
_______________________________________________________________________ Refer to Case # XXXX for the following documents ( from XXXX XXXX XXXX : XX/XX/XXXX, XXXX Flood Gap First Letter XX/XX/XXXX, XXXX Activity Cancelled Letter XX/XX/XXXX '' Lender-Placed Flood Gap First Letter ( a copy of the XX/XX/XXXX letter ) XX/XX/XXXX, XXXXLender-Placed Activity Cancelled Letter XX/XX/XXXX, XXXXLender-Placed Flood Gap First Letter ( a copy XX/XX/XXXX and XX/XX/XXXX letters XX/XX/XXXX, XXXXLender-Placed Flood Gap Reminder Letter XX/XX/XXXX, XXXXLender-Placed Flood Gap Policy in which XXXX XXXX notified me that that they had taken {$340.00} out of my escrow to buy {$24000.00} worth of flood coverage with XXXX XXXX XXXX ( no website for this company ) ( not my flood insurer ) XX/XX/XXXX XXXX XXXXafter I had sent copies of the RCV of {$170000.00} ( justifying my flood coverage as being in compliance, they ignored me ) so XX/XX/XXXX, XXXX filed a complaint with CFPB ( Case # XXXX ) _______________________________________________________________________ XXXX. XX/XX/XXXX : Replacement Cost Value ( RCV ) of XXXX XXXX XXXX, XXXX XXXX, MA, recalculated by XXXX  at {$180000.00}. Previous RCV calculated by XXXX ( for closing ) was {$170000.00} ( see # 1 above ), but XXXX XXXX had ignored that document in each of the three times I sent it to them. 

XXXX. XX/XX/XXXX : Homeowners Declaration Page of XXXX Homeowners policy # XXXX, showing " Replacement Cost with Debris Removal, {$180000.00}, based on RCV calculated in # 2 above. 

XXXX. XX/XX/XXXX : XXXX XXXX XXXX " Lender Placed Cancelled Letter '' accepting that I had complied with their requirements ( result of Complaint # XXXX ). 

XXXX. XX/XX/XXXX : " Lender-Placed Insurance Confirmation of Cancellation '' from XXXXXXXX XXXX 

XXXX. XX/XX/XXXX : XXXX XXXX sends another " Lender-Placed Flood Gap First Letter '' -- AGAIN, starting the process all over again. I filed another complaint with CFPB ( Case # XXXX -- XXXX ) ) noting that XXXXXXXX XXXX had rescinded its compliance with my request in the previous XXXX # XXXX. 

XXXX. XX/XX/XXXX : Letter from XXXXXXXX XXXX re. Complaint # XXXX, saying that XXXXXXXX XXXX XXXX response to complaint # XXXX agreeing to rectify the complaint in Case # XXXX was in ERROR. For the first time, XXXX XXXX  informs me that any RCV will only be recognized if it is cited in the Endorsements of the Insurer 's Coverage Declaration Page. That requirement was satisfied in # 4 above. 

XXXX. XX/XX/XXXX : XXXX XXXX sends me another " Lender Placed Activity Cancelled Letter '' acknowledging that Items # 1 and # 2 had satisfied their requirements. 

XXXX. XX/XX/XXXX : XXXXXXXX XXXX notifies me that it has sold mortgage servicing duties to Flagstar Bank effective XX/XX/XXXX. 

XXXX. XX/XX/XXXX : Flagstar Bank, wasting no time at all, writes me a letter that says : " We compared your current flood insurance coverage to the minimum amount of flood insurance required for your loan as described above and based on the information available, you need to increase your flood insurance coverage by {$74000.00}. '' In other words, " I'll see XXXXXXXX XXXX {$24000.00} gap and raise you to {$74000.00}. '' Flagstar Bank was not apparently given any history of the mortgage ( or they ignored it ) or they would have realized that they were going to get slapped down. Notice that they did not even realize that the RCV was calculated by XXXX, and cited on its declarations page. 

XXXX. XX/XX/XXXX : FYI. Here is the Policy Declarations page of my current, paid-up flood insurance coverage for the mortgaged property. It is the RCV as calculated in # 3 above. 

XXXX. XX/XX/XXXX : My letter to Flagstar Bank outlining why its XX/XX/XXXX letter was wrong, and raised an issue that had already been resolved with XXXXXXXX XXXX BEFORE Flagstar Bank came to own the servicing rights to the mortgage. 

XXXX. XX/XX/XXXX : Flagstar Bank letter to me complaining that I had not responded to its letter of XX/XX/XXXX, ignoring my XX/XX/XXXX letter. 


CONCLUDING OBSERVATIONS : Consider that Flagstar Bank had purchased the servicing of a mortgage from a Company, XXXX XXXX, which had ALREADY agreed ( on two separate occasions -- after my complaints to CFPB ) to accept the flood coverage that I have ( giving up its ill-considered two episodes of FORCED-PLACEMENT of flood gap coverage ). Consider that, in this process, Flagstar Bank has actually based its calculation of flood coverage gap by referring to the original coverage amount ( {$170000.00} ), completely neglecting that the coverage, based on RCV, had been raised to {$180000.00} ( and paid for by me ), and citing the difference between that and $ XXXXwhich it claims, wrongly, is requiredto arrive at the flood insurance coverage gap of {$74000.00}! 

It should be especially noted that XXXX XXXX had originally based its decision on what should be the minimum flood coverage according to XXXX XXXX regulations, while Flagstar has ( gratuitously ) made up its own set of criteria that it IMPLIES are in conformance with relevant laws and regulationswhen they are NOT. WHY has Flagstar seen fit to make up its own rules, that are more strict that XXXX XXXX regs? 

See the explanation in XXXX XXXX letter to me of XX/XX/XXXX, below : As indicated in the Notice of Special Floods Hazards and Availability of Federal Disaster Relief Assistance Participating Communities you received at settlement, the required amount of flood insurance on your flood insurance policy must be equal to the lesser of the following, ( fXXXX XXXX XXXX XXXX XXXXXXXX ) 1. The replacement cost value ( RCV ) of the insurable improvements 2. The unpaid principal balance ( UPB ) of your mortgage loan 3. The maximum amount of insurance coverage available through the National Flood Insurance Program ( currently {$250000.00} ). 

In contrast, Flagstar Bank makes up its own criteria ( with no reference to XXXX XXXX regs ) and then misapplies them. The letter from Flagstar Bank ( XX/XX/XXXX ) makes long-winded notice of all the laws and regulations that require me to have flood insurance ( which is not in dispute ), then seems to imply, in the next paragraph, that, according to its employment of the phrase full insurable value ( instead of Replacement Cost Value ( RCV ) ), seems to conclude that that Criterion # 3 is trumped by Criterion # 2, that XXXX XXXX maximum is paradoxically the required minimum. That is preposterous. 

The amount of flood coverage that we require must be at least equal to the lesser of : 1. The outstanding principal balance or the maximum line of credit of the designated loan ( s ) ; or 2. The maximum limit of insurance available for a particular type of property ( building ) under the XXXX, which is currently {$250000.00} for residential buildings and {$500000.00} for Other Residential or Non-Residential buildings ; or 3. The full insurable value of the property ( building ) and any personal property securing the designated loan. 

It does seem that XXXX XXXX # 2 and # 3 are equivalent to Flagstar Banks # 1 and # 2, and XXXX XXXX # 1 is obviously Flagstar Banks # 3, but it ( Flagstar ) doesnt use RCV to measure the full insurable value of the property in order to perpetuate the particular forced-placement of flood insurance gap coverage. In fact, Flagstar Bank does not even attempt to articulate its XXXX # 3 ( or even says what full insurable value actually is ) or how it figures in its calculation of the minimum required.

Company public response: Company has responded to the consumer and the CFPB and chooses not to provide a public response
Company response to consumer: Closed with explanation