Cancellation Qualifying Reasons/RC 01/Sale or Transfer

NFIP Cancellations: Proof of Ownership Transfer Guidelines

When processing an NFIP policy cancellation due to the sale of a building, underwriters must confirm that ownership has legally transferred. The following guidance clarifies which documents are acceptable as proof of sale and common issues to watch for. In all cases, the documents must show three elements to be accepted for Reason Code 01:

• A matching property address (or one free of discrepancy)
• The seller's name on the document must match the name of the NFIP policyholder
• The date of the sale or transfer

Details about the terms of sale/transfer, including the monetary amounts, can be redacted.

Recorded Deed

The recorded deed is the most reliable proof that ownership has changed.

• It contains the legal transfer date and is filed with the county recorder’s office.
• If available, this document should be used to determine the effective cancellation date.

Issue: Deeds often describe the property with a legal address or using metes and bounds, which makes it difficult to match to street addresses.

Supporting Documents

Closing Disclosure (CD)

• Used in transactions with a mortgage.
• Specifies loan details and confirms lender funding.
• Buyer acknowledges receipt before closing, but the document itself does not confirm that closing occurred.

Issue: The transaction is not finalized until the deed is recorded.

Settlement Statement (ALTA or HUD-1)

• Used in both cash and financed transactions.
• Outlines final fund disbursements for buyer and seller.
• Indicates that closing was planned, but does not confirm the deed was recorded.

Issue: Settlement statements can be revised before closing, meaning the transaction might not yet be complete.

Unacceptable Documents

🚫 Purchase Agreements & Contracts for Sale

• These documents only reflect an intent to sell, not the actual transfer.
• They do not confirm closing or ownership change.

🚫 Estimated Settlement Statements

• Preliminary versions are subject to change and should not be used.

Best Practices

✅ If a recorded deed is available, it should be the primary document used to verify the transfer date.
✅ If a recorded deed is not immediately available, a final Closing Disclosure or Settlement Statement may be used if accompanied by confirmation that the deed has been recorded.
✅ If any document is unclear or appears preliminary, request further documentation from the insured, agent, or county records.
✅ When reviewing cancellation requests, ensure the effective date aligns with the legal transfer of ownership.

By adhering to these guidelines, underwriters can ensure that NFIP cancellations due to property sales are processed accurately and in compliance with policy requirements.