Concerns about Citi Mortgage force-placed insurance practices in California have put the lender at the focus of an ongoing investigation.

Force-placed insurance is a type of homeowner’s insurance that goes into effect when a homeowner’s own insurance fails to meet certain requirements imposed by their mortgage lender.

Once the force-placed policy goes into effect, the homeowner gets stuck paying the premiums. Depending on the relevant terms, refusing to pay those premiums could put the homeowner at risk of foreclosure.

These days, force-placed (or “lender-placed”) insurance is a requirement found in many lenders’ mortgage agreements, like with Citi Mortgage in California.

For years, lenders have required homeowners to take out their own homeowners’ insurance to protect the lender’s interest in the property. By imposing a requirement for force-placed insurance, the lender makes its interest even more secure.

That security comes at the homeowner’s expense, however. A number of different events can engage a force-placed policy, sticking the homeowner with a bill for the premiums.

These policies may be engaged if the homeowner allows their own insurance to lapse, if the insurance they purchase themselves fails to meet the lender’s specific requirements, or even if they fail to offer the lender a timely proof of insurance.

The practice of imposing force-placed insurance on homeowners has lately been the subject of a lot of negative press because the way these insurance policies get implemented creates opportunities for abusive practices.

Consumer advocates point out that force-placed policies tend to offer less coverage at substantially higher premiums. These policies often fail to cover things like loss of personal property or the cost of alternative housing while repairs are being done.

Some advocates attribute the higher premiums to the fact that it’s the bank, not the homeowner, who picks the policy. The bank does not have the same interest the homeowner has in picking a policy that gives them the best value – a phenomenon sometimes referred to as “reverse competition.”

Aggravating the problem of higher premiums is the fact that some lenders may allegedly enter into agreements with the insurance providers that benefit both companies at the homeowner’s expense. Banks have been known to take kickbacks from insurance providers in exchange for writing those providers’ policies into mortgage agreements.

Concerns like these are finally getting attention from regulators. State authorities in California, Florida, Texas and New York have all held hearings on the subject. New York officials commented that the practice indicates a lack of competition, higher prices and lower loss ratios, all of which harm homeowners in the end.

Citi Mortgage Force-Placed Insurance Investigation

Attorneys are now investigating claims that some California homeowners have been given short shrift due to the force-placed insurance policies at Citi Mortgage.

California homeowners may qualify to participate in this investigation if they have a home mortgage through Citi Mortgage and have been subject to a force-placed insurance policy sometime over the past two years.

Citi Mortgage may have assessed improper charges against some of these California homeowners. A free consultation could help affected homeowners get their money back.