Seller Finance Buyer Fails to Maintain Insurance - Proper Way to Bill Back for FPI?

[Jay Chekansky]

Hey All,

I am seeking advice on the proper way to charge back my borrower on a seller finance deal in which the borrower has allowed the insurance to lapse. I have a force placed insurance policy now in place to cover.

This sale closed in early Feb 2024. The buyer was to provide proof of insurance paid in full for the first year. I received an EOI from the insurer, but turns out that he had only paid for 1 month (ultimately my oversight). The insurer says that the CC on file keeps getting denied.

The borrower is failing to respond to calls/texts/emails/letters regarding the situation.

The mortgage that was signed/recorded permits the lender to recover any charges associated with the need to apply this type of insurance policy, but doesn't specify how those charges are to be recovered

In this example, the annual premium for the FPI that I (Lender) paid is roughly $1000. Should I break that into 12 month payments and add to his existing monthly payment? Demand a 1 time $1000 payment be made in 30 days?