BofA Allegedly Forces Flood Insurance on Mortgagees

An Oklahoma couple claims their mortgage lender, Bank of America, forced them to buy unnecessary and overpriced flood insurance through an affiliate.

Mortgage lenders are required under federal law to ensure homeowners carry flood insurance if the secured property is within a special flood hazard area. These zones are established by the Federal Emergency Management Agency and occasionally updated with new information.

In 2011, Bradley and Cynthia Ice took out a $107,000 mortgage loan through Bank of America. At the time, they were not required to buy flood insurance because their home was not in an SFHA.

However, in June 2019, the couple received a letter from the bank demanding that they obtain $70,800 worth of flood insurance within 60 days. The couple say that when they called to dispute this requirement, Bank of America told them FEMA had changed the official federal flood maps, and as a result their home was now in an SFHA.

A subsequent letter from the bank gave an earlier deadline to obtain their own flood coverage; if they did not comply, the bank would implement a policy with an annual premium of about $720.

On June 25, the couple received FEMA approval for a map amendment removing their homesite from the SFHA on the updated flood map. Still, they claim, Bank of America persisted in its demand for flood insurance.

The couple consulted with a State Farm representative on July 30. According to the lawsuit, the insurance representative advised them that their property was not actually within an SFHA on current FEMA maps and suggested they request a flood determination certificate from the lender as proof of need.

In the meantime, to cover themselves just in case, the couple purchased flood insurance with an annual premium of $339.

On Aug. 10, the plaintiffs provided proof of insurance to Bank of America; still, they claim, the lender created an escrow account two days later to pay for the doubly expensive insurance through an affiliated entity.

In their class action lawsuit, the Ices maintain that once the lender force-places such insurance, “it ensures payment of the premium by paying it and then withdrawing the amount from the mortgagor’s escrow account or adding it to the borrower’s loan balance.”

The couple then hired a land surveyor at their own expense, and he determined the home’s elevation placed it in what’s called a Zone X — where flood risk is moderate to low and flood insurance is not mandatory.

They provided the surveyor’s elevation certificate to Bank of America on Aug. 16, followed 11 days later by a letter they procured from FEMA confirming that the home was not within an SFHA.

Finally, the bank changed course and reversed its flood insurance requirement. The forced policy was subsequently canceled, and the plaintiffs believed the issue was behind them.

However, in October and November, they once again started receiving letters from Bank of America demanding they obtain flood insurance.

The lawsuit claims the two named plaintiffs are not the only mortgage holders in this situation: “[Bank of America] has made identical or similar misrepresentations and unreasonable demands with accompanying barrages of letters and ignoring evidence and even its own prior findings to thousands of other persons who are similarly situated to plaintiffs, in order to justify force placing them into excessive, high-premium flood insurance policies for their properties.”

The complaint also points out Bank of America has faced previous legal challenges for the same reasons. A similar 2014 class action, for example, was settled for $31 million.

The plaintiffs argue the lender’s actions violate the federal Truth in Lending Act and Real Estate Settlement Procedures Act. In addition, they are claiming breach of contract, breach of the implied covenant of good faith and fair dealing, breach of fiduciary duty, unjust enrichment and conversion.

The Ices are seeking monetary, injunctive and declaratory relief, plus penalties and court costs.

Has Bank of America tried to require you to carry flood insurance even though you don’t believe your home is in a flood hazard area? We want to hear from you. Tell us your story in the comments.

The plaintiffs are represented by Edward L. White and Kerry D. Green of Edward L. White PC.

The Bank of America Class Action Lawsuit is Bradley Ice and Cynthia Ice, et al. v. Bank of America NA, Case No. 5:20-cv-00537, in the U.S. District Court for the District of Western Oklahoma.

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