Judge Wants Answers in $140M Ocwen, Assurant Force-Placed Insurance Settlement

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A California couple who objected to a proposed $140 million class action settlement involving an alleged force-placed insurance kickback scheme between mortgage lender Ocwen Loan Servicing, LLC and insurance provider Assurant Inc. have won the ear of the judge overseeing the case, who agreed Wednesday that the parties should disclose how much money Class Members would actually receive from the deal.

In an objection filed Tuesday, Class Members Shane and Cecilia Valdez said:

“This is the type of settlement that courts and commentors frequently warn about. It promises large attorneys’ fees to class counsel, but will provide very little to the class. Most class members will receive nothing. Yet, defendants — who unquestionably made hundreds of millions of dollars from their forced-place insurance scheme — will be absolved from liability if the court approves this proposed settlement.”

Ocwen and Assurant are accused in the class action lawsuit (Lee v. Ocwen) of entering into a collusive agreement that allowed Ocwen to receive unauthorized kickbacks from Assurant in the form of commissions or other payments by using Assurant as its lender-placed insurance provider.

Lender-placed insurance (also known as force-placed insurance) is hazard, flood, flood gap or wind insurance coverage that is placed on a borrower’s property by the mortgage lender to protect the borrower and lender when the borrower’s insurance policy lapses, or when the borrower does not maintain a homeowner’s insurance policy that is acceptable to the mortgage lender.

In addition to the illegal kickback allegations, class action plaintiffs alleged that the way in which Ocwen’s force-placed insurance policies were obtained and placed caused borrowers to pay inflated rates for excessive coverage.

Ocwen and Assurant deny the allegations and any wrongdoing but agreed in April to create a $140 million class action settlement fund that would provide relief to about 400,000 Ocwen borrowers nationwide who had hazard, flood, flood-gap, or wind insurance coverage forced on their properties.

Class Members have until Sept. 9, 2015, to a file a claim if they wish to participate in the proposed Ocwen force-placed insurance class action settlement.

The Valdezes objected to the proposed class action settlement on May 12, calling it unfair because it asks for $9.85 million in attorneys’ fees but provides no information on how the $140 million will be split among plaintiffs nor how much money would actually be paid to Class Members.

They asked the Court to require the parties to answer several important questions, including:

• How much in force-placed premiums did defendants charge Settlement Class Members during the Class Period?
• Of the 400,000 Settlement Class Members, how many have submitted claims for settlement proceeds?
• What is the actual dollar amount that defendants will pay to the Settlement Class? Is that amount anywhere close to the $140 million that the parties suggest the settlement is worth?
• What percentage of estimated damages is the amount that the Settlement actually will pay to Class Members?
• How does the requested $9.85 million in attorneys’ fees compare to the actual payout?

In an order issued May 13, U.S. Magistrate Judge Jonathan Goodman agreed with the Valdezes’ objection and ordered Ocwen, Assurant and the plaintiffs to provide answers to the questions raised by May 26.

He flagged several issues raised by the objectors as “being worthy of comprehensive discussion,” including:

• “Even if not required, why would the settling parties not want to provide the additional information demanded by the objectors?”
• “Would it not make sense for the court to learn the actual dollar amount which will be paid to the settlement class, or at least a reasonable understanding of the likely range, before determining whether the agreement and the proposed fees are fair?”
• “Why should the Court not postpone a ruling on attorney’s fees and expenses until after the settling parties advise how much Defendants will actually pay out under the settlement?”

A Final Fairness Hearing is scheduled for June 11, 2015.

The Ocwen Assurant Force-Placed Class Action Lawsuit is Jennifer Lee v. Ocwen Loan Servicing LLC, et al, Case No. 0:14-cv-60649, in the U.S. District Court for the Southern District of Florida.

UPDATE: The Ocwen force-placed insurance class action settlement received final approval on Sept. 14, 2015. Class Members have until Dec. 14, 2015 to file a claim.