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Force-Placed Insurance: The Event Whose Consequences Depend on What Happens Next

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Force-Placed Insurance: The Event Whose Consequences Depend on What Happens Next

Scope statement up front: the statutory notice chronology under RESPA §1024.37 IS modeled in this case — dated first and reminder notices, the earliest-permissible-charge computation (first notice + 45 days), placement-time violation evaluation, the evidence-received event with its 15-day cancellation deadline, and cancellation-timeliness flagging — under a declared 30-day-month day convention (the ledger is month-granular; the convention is stated in every chronology posting). Verified both ways: a fully compliant sequence (charge day 65 ≥ permissible day 50; cancellation 9 days ≤ 15) and a premature placement flagged with no_first_notice + no_reminder_notice violations (CHRONOLOGY_VERDICT.json + receipts). Premium pricing and commission structures remain outside scope.

1. The event

Hazard-insurance evidence lapses; the servicer force-places a $2,400/year policy; the premium enters the borrower's escrow obligation (+$200/month).

2. Starting mortgage state

$300,000 at 6%; P&I $1,798.65; escrow $400; obligation $2,198.65; current; coverage verified.

3–4. Three branches, one placement

  • Cure: lapse → placement → obligation $2,198.65 → $2,398.65 → borrower absorbs it, provides coverage, placement removed, obligation reverts. CURRENT throughout, zero advances, zero security consequence — the event is absorbed by the escrow/servicing structure, and reporting that truthfully is the result.
  • Deterioration: same through month 4; then — as a declared scenario input, not an EVA behavioral prediction — the borrower stops paying. Consequences computed: 30d → 60d, late fees per the declared note fixture, $3,597.30 of servicer advances keeping the investor whole.
  • Improper placement: the identical placement against verified coverage with no lapse is flagged improper at posting time, and removal refunds $400 — the refund posting itself cites RESPA §1024.37(g).

5–6. Downstream and why positions differ

In the cure and improper branches nothing reaches any security; in the deterioration branch the path to securities runs through payment behavior and advances — every step posted.

7. What EVA computes

State-dependent consequence mechanics: same event, three outcomes, distinguished by coverage-evidence state and payment behavior, with machine reconciliations and byte-identical replay.

8. Outside the demonstrated scope

FPI premium pricing and commissions; loss-mitigation beyond advances; any behavioral model of borrower payment response. (The notice/timing chronology moved INTO scope in the final round — see the scope statement.)

9. Evidence / replay coordinate

POST /api/v1/servicing/ledger/run, source commit 422ea36a; receipts and VERDICT.json alongside.