$76M Nationstar Force-Placed Insurance Settlement Approved

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On Monday, a federal judge issued final approval for a $76 million settlement to resolve claims in a class action alleging that Nationstar Mortgage colluded with force-placed insurance companies to earn illegal kickbacks. The settlement increased $22 million at the final fairness hearing from the original $54 million originally proposed.

In June, the plaintiffs in the force-placed insurance class action lawsuit asked Magistrate Judge Jonathan Goodman to issue final approval for their $54 million settlement. The $76 million settlement is in addition to the value of injunctive relief.

More than 380,000 were represented in the Class, and these individuals were borrowers with loans with Nationstar LLC who had insurance force-placed on their homes between Jan. 1, 2008 and Jan. 30, 2015. The force-placed insurance was maintained by Assurant Inc. or is subsidiaries and this practice overcharged buyers for hazard, flood or wind insurance coverage.

As has been common practice, mortgage banks have required borrowers to protect their properties with hazard insurance. In situations where the homeowner fails to pay for their hazard insurance, the mortgage bank force-places its own insurance on the property.

Plaintiffs did not object to this legal practice, but what they did object to were the agreements allegedly held by Nationstar and Assurant to work together to force-place insurance. These force-placed insurance policies allegedly carried inflated insurance premiums offering more coverage than was reasonable or necessary to protect the property. Nationstar and its affiliates allegedly received tens of millions of dollars kickbacks from Assurant by way of the high-priced premiums that borrowers were forced to pay.

Eligible Class members were able to file a claim to be included in the Nationstar, Assurant force-placed insurance class action settlement though Oct. 14, 2015. The potential award for individual Class Members is a cash award or credit in the amount of 12.5 percent of the Net Premium charged to the claimant by Nationstar. This amount will vary per person based on their individual hazard insurance premiums.

In addition to the monetary settlement to be paid to eligible borrowers, the terms of the settlement also dictate that Nationstar will be blocked from engaging in practices related to force-placing inflated insurance coverage for five years.

Other mortgage banks have been accused of similar force-placed insurance practices with several insurers and have also entered into settlements. Last year, Wells Fargo NA and Assurant settled for an undisclosed amount and Bank of America NA settled for $228 million. JP Morgan Chase NA, HSBC USA NA and Citibank NA have also agreed to settle similar claims regarding force-placed insurance.

The class is represented by Adam M. Moskowitz, Tucker Ronzetti, Rachel Sullivan and Robert J. Neary of Kozyak Tropin & Throckmorton LLP, Lance A. Harke, Sarah Engel and Howard M. Bushman of Harke Clasby & Bushman LLP, Aaron S. Podhurst, Peter Prieto, John Gravante III and Matthew Weinshall of Podhurst Orseck PA, Hector Pena of Hector Pena PA, Chip Merlin of Merlin Law Group PA, Kenneth G. Gilman of Gilman Law LLP, Gurian Group PA, and Parker & Dufresne PA.

The Nationstar Force-Placed Insurance Class Action Lawsuit is Howard Braynen, et al. v. Nationstar Mortgage LLC, et al., Case No. 1:14-cv-20726, in the U.S. District Court for the Southern District of Florida.