Force-Placed Insurance: What You Need to Know

As a homeowner, you most likely have a mortgage, and if you have a mortgage, you will have hazard insurance for your home. This hazard insurance is a mandatory requirement from your lender, and your insurance must equal your mortgage balance. This assists in protecting the mortgage lender’s financial interest in your property.

What happens if your hazard insurance coverage lapses? Well, the good news is, there is usually a program in place to make sure that your home never has a lapse in coverage. Many mortgage companies partner with insurance companies to establish force-placed insurance on the home. The insurance remains consistent on your home in accordance with your agreement with your mortgage company.

Sounds great, right? Well, that’s where the bad news comes in. This force-placed insurance isn’t simply continuing your coverage with another company. With these type of lender-placed insurance policies, there is a lot more that is being done without express consumer consent, and this force-placed insurance is costing many homeowners thousands of dollars. According to some homeowners, these force-placed insurance policies sometimes costs them their home.

Outrageous Fees and Company Kickbacks

Some shady practices have been going on once lenders and insurance companies figured out a way to make additional money on force-placed insurance. The mortgage companies partner with an insurance company, and often have exclusivity agreements with them.

The policies that are force-placed are usually double to ten times the amount of the homeowner’s original insurance, and this is partly because the coverage limits on the insurance are excessive and are way more than homeowners want or need.

Gouging customers to force-place the insurance is bad enough, but in addition to these policies, mortgage companies or the insurance companies charge homeowners high premiums. Some homeowners have been forced into foreclosure because of the additional expenses of the force-placed insurance.

Fannie Mae and Freedie Mac are legally required to reimburse mortgage servicers for all costs, including insurance. A couple of years ago, Fannie Mae tried to step in and purchase insurance directly instead of reimbursing servicers. Fannie Mae’s plan would have saved taxpayers $300 million dollars for this intervention. In a surprising action, the Federal Housing Finance Agency, Fannie Mae’s regulator, extinguished the action without any explanation to the public.

Force-Placed Insurance Lawsuit Information

There have been a number of lawsuits against lenders and insurance companies for their unlawful force-placed insurance practices. Recently, JP Morgan Chase and insurer Assurant settled outside of court with a group of plaintiffs in order to resolve force-placed insurance allegations. According to the lawsuit, JPMorgan force-placed insurance with excessive levels of coverage via Assurant, and then received about $1 billion in “referral commissions” from Assurant from illegal kickbacks.

Wells Fargo, Citibank and U.S. Bank are some of the larger banks who have force-placed outrageous insurance policies and passes along the costs to homeowners. Smaller companies who have force-placed insurance include BB&T Mortgage, Quicken Loans, LoanCare, Fifth Third Bank, OneWest Bank, Provident Bank and Seterus Inc.

If you had hazard insurance force-placed by your mortgage company, you may be entitled to legal compensation. Our attorneys can guide you in filing a lender-placed insurance lawsuit and can provide more information on joining a force-placed insurance class action lawsuit, if applicable. Consultations are free and confidential.

Join a Free Force-Placed Insurance Class Action Lawsuit Investigation

If you paid for force-placed insurance from a lender, you may be eligible to join a free class action lawsuit investigation into the improper charges you may have paid.

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