Have you had hazard or homeowners insurance that lapsed, only to be replaced by coverage imposed by our mortgage company—and at your expense? Has this happened sometime in the last five years?

If so, you may qualify to join a lender placed hazard insurance investigation. This investigation is looking into the apparently industry-wide issue of lender placed hazard insurance and homeowners insurance, sometimes called “force-placed insurance.”

What is Lender Placed Hazard Insurance?

Hazard insurance often includes coverage for floods, earthquakes, and other types of natural disasters. Essentially, a homeowner can get stuck with lender placed hazard insurance or homeowners insurance when their own insurance policy lapses, if the coverage doesn’t meet the lender’s requirements, or if a lender hasn’t received proof of insurance coverage. Lenders can then choose to impose new coverage, often at a higher cost for the consumer, and it can be placed by a lender, loan servicer, or bank.

This practice is not necessarily illegal. However, some lenders may be overcharging consumers for lender placed hazard insurance policies while receiving kickbacks from insurers.

Generally, lender placed hazard insurance is much more expensive than regular insurance, and the additional cost on top of mortgage payments can drive borrowers into financial crises. Indeed, those who incur lender placed hazard insurance are often those who are already struggling with making their monthly payments.

They’re likely to have even greater difficulties when hit with these more expensive costs. In some cases, lender placed hazard insurance or homeowners insurance can be up to ten times more expensive than regular insurance policies. Homeowners may even risk foreclosure as a result.

Because lender placed hazard insurance is so much more lucrative than regular insurance for servicers, these institutions have greater incentive to impose more expensive policies than less expensive alternative routes.

A number of mortgage companies are included in this lender placed hazard insurance investigation, including the following:

• AmeriHome Mortgage
• Arrest Bank
• Dovenmuehle Mortgage
• Freedoms Mortgage Corp.
• Lakeview Loan Servicing
• LoanDepot
• Matrix Financial Corp.
• Pingora Loan Servicing
• Provident Funding
• Quicken Loans
• Residential Mortgage
• Shellpoint Mortgage Servicing

According to the Consumer Financial Protection Bureau (CFPB), lenders must have reasonable cause to impose lender placed hazard insurance and homeowners insurance. Borrowers are also legally supposed to be notified before these policies are enacted.

Joining a Lender Placed Hazard Insurance Investigation

An investigation has been launched into force-placed homeowners and hazard insurance. So how do you know if you qualify for the investigation? If you have a mortgage through one of the above lenders, received a notice that your insurance lapsed, and you were given replacement coverage at your expense in the last five years, you may qualify to participate.

If you were hit with an expensive lender placed hazard insurance policy by one of the companies above, you may be able to join a force-placed insurance policy lawsuit investigation.