Cx10 is a multistate document which, while not statutorily required, is one of our frequently used disclosures. This document is provided in our closing packages providing notice to the borrower that if their property is found to be located in a Special Flood Hazard Area they may be required to purchase flood insurance.
2014 Mass. Sess. Laws ch. 177 was signed into law and will take effect November 20, 2014 (and will be codified as Mass. Gen. Laws Ann. ch. 183, § 69). This new bill prohibits creditors from requiring a purchaser or owner of residential property to purchase or pay for flood insurance on the property:
- At a coverage amount that exceeds either of the following at the beginning of the year for which the flood insurance policy shall be in effect:
- For most mortgage loans, the outstanding principal mortgage balance;
- For HELOCs or home equity loans, the full value of the credit lien or outstanding principal on the equity loan; or
- For a second mortgage, the principal amount of such mortgage;
- That includes coverage for contents; or
- That includes a deductible of less than $5,000.
The law also requires that if the creditor requires the purchase of flood insurance, the following notice must be provided to the owner or purchaser in clear and conspicuous print:
“Please note that the flood insurance we are requiring you to purchase will only protect your creditor’s or lender’s interest in your property. Massachusetts law prohibits a creditor or lender from requiring you to purchase flood insurance in excess of the amount of your principal mortgage and, in the case of a home equity line of credit, home equity loan or second and subsequent mortgage, the full value of the credit line, outstanding principal on the equity loan or second or subsequent mortgage on that property at the beginning of the year for which the policy will be in effect. The insurance may not be sufficient to pay for many needed repairs after a flood and may not compensate you for your losses in the property due to the flood. If you wish to protect your home or investment, you may want to purchase more flood insurance than the amount we are requiring you to buy.”
We will be adding the prohibitions and the required notice that the law provides to Cx10.
The notice must be provided “at the time the purchaser or owner of the residential property is notified of the need to purchase or pay for flood insurance.” (Ibid.) Quite often this occurs post-Initials (hence the reason for having it print on Cx10, which is a Closing document), but for those occasions where it is known at the time of Initial Disclosures that flood insurance will be required, we will be providing new document Cx18930, which substantially contains the same notice and information as will be included in Cx10. This document will print under the following conditions:
- Document Package = Initial Disclosures
- Flood Insurance Required = Yes
- State Code = Massachusetts
These changes will take effect, and the new document will be available, on November 20, 2014. If you have any questions or concerns on this announcement, please contact Client Support at 1.800.497.3584
November 5, 2014