There are various provisions under Arkansas law prohibiting coercive practices in regards to various insurances obtained in connection with mortgage loans, as follows:
Ark. Code Ann. § 23-32-206(a) (West 2012) prohibits several entities from requiring a mortgagor to purchase casualty insurance in an amount “in excess of the fair market value of the buildings or appurtenances on the mortgaged premises.”
Ibid. § 23-66-312(a)(1) (West 2012) prohibits entities (including depository institutions and their affiliates) from “unreasonably disapprov[ing] the insurance policy or binder provide[d] by a borrower for the protection of the property securing the credit or lien.”
Ibid. § 23-66-605 (West 2012) prohibits entities (including depository institutions and their affiliates) from requiring as a condition precedent to extending a loan, that a borrower obtain insurance through a particular insurance company or insurance agent. Further, it prohibits such entities from rejecting a borrower’s chosen policy simply on the grounds that such policy was underwritten by a person who is not associated with such entity.
Ibid. §23-66-606 (West 2012) requires certain disclosures for when insurance sales activities are conducted by a depository institution, its affiliates, its employees, or unaffiliated third parties on behalf of the depository institution. These disclosures inform the borrower that the insurance policies offered by the depository institution are not insured by any Federal government agency, are not deposits, and may involve investment risks.
In addition, when a loan application is pending and insurance is offered or sold to a customer, or insurance is required in connection with the loan, the borrower must be provided a disclosure indicating that the depository institution’s credit decision will not be affected by the borrower’s choice of insurer, other than that the depository institution may impose reasonable requirements concerning the credit worthiness of the insurer and the scope of coverage.
For these types of provisions in various states, DocuTech provides multi-state “anti-coercion” disclosures, so that brokers and/or lenders can prove that the borrower was aware, in the early stages of the loan process, that they may choose the insurer and insurance products of their choice and that the broker and/or lender is not pressuring them into buying a specific insurance policy or obtain insurance through a particular agency. DocuTech will be providing one of these disclosures (Cx17018) for loans secured by property in Arkansas, with text which will cover the relevant subject matter of all the preceding sections.
This document will begin printing generically in all Initial Disclosure packages for loans secured by property in Arkansas, when a client is acting as a broker or a lender in a transaction, on November 29, 2012. If you have any questions or concerns about these changes, please contact Client Support at 1.800.497.3584.
November 21, 2012