Residential
Flood Insurance Compliance
Clayton® Flood Insurance Compliance Ensures Best Execution of Regulatory & Investor Guidelines to Mitigate Losses
Clayton helps servicers and subservicers measure their performance, validate regulatory and investor compliance and identify loan and portfolio-level risk. We provide unbiased and independent findings, delivered as anonymized performance benchmarking.
Trends in Flood Insurance
Flood insurance compliance is a growing area of interest for regulators, with topics of concern including borrower harm, insufficient coverage, force-placed insurance and losses.
Additionally, FHA announced a proposed rule to allow private policies to align FHA with Fannie and Freddie, driving a continued rise in private policies. However, there is risk because errors happen when vendors are tasked with validating coverage adequacy and initiating required borrower correspondence.
Look at this scenario:
An average servicing portfolio with 1 million loans might see a 2% incidence of properties in a flood zone.
- With 20,000 properties in a flood zone, a 5% error rate would equate to 1,000 violations.
- At $2,000 each, the fine levied on the servicer is $2,000,000, plus the expense of remediation of the problem.

To Ensure Flood Insurance Compliance, Know the Accuracy and Diligence of Your Insurance Vendor or Internal Team
Ask for a Targeted Flood Insurance Compliance Review
Findings are delivered at a fraction of the cost of fines, with operational best practices and remediation guidance. Useful for servicers and investors employing sub-servicers.
Consider Clayton’s Flood Insurance Oversight
Oversight of your riskiest loans or your entire portfolio assures that you can address gaps or shortcomings before they cause problems. These high-risk loan pools include:
- Portfolios with a higher floodplain concentration
- Higher incidence of private insurance for high-end homes
- More activity regarding placement or cancellation of insurance