Attorneys in an ongoing class action lawsuit investigation are taking a close look at CitiMortgage force-placed insurance practices in California.

What Is Force-Placed Insurance?

Force-placed insurance, sometimes known as lender-placed insurance is a type of homeowner’s insurance. It goes into effect when and if a borrower’s own homeowner’s insurance fails to meet the requirements of the mortgage lender.

Lenders use force-placed insurance as just one more way to protect their own interest in the property. Since the property functions as collateral for the mortgage, the lender has an interest in maintaining the property’s value.

That’s why as a standard practice, lenders require borrowers to take out a homeowner’s insurance policy on the subject property. Lenders usually require that insurance to meet certain requirements. But within the limitations of those requirements, borrowers are free to shop for a policy that gives them the best value.

For even more security, lenders sometimes require the borrower to accept a force-placed insurance provision in the mortgage agreement.

Having a force-placed insurance provision practically guarantees the property will always be insured to the lender’s satisfaction, even if the borrower fails to get their own insurance that satisfies the lender’s requirements.

That’s great for the lender. But for a few different reasons, force-placed insurance can be a huge burden on the borrower.

Force-placed policies are selected by the lender, not the borrower who could end up paying premiums. For that reason, lenders don’t have the same incentive to shop around for a policy that gives the borrower good value.

Sure enough, many force-placed insurance policies give the borrower a raw deal. These policies have a reputation for providing scanty coverage at premiums several times higher than those for policies that homeowners can choose on the open market.

Forced-placed policies tend not to cover ancillary needs that typically arise in times of serious property damage – needs like the cost of temporary housing while repairs are being made.

Consumer advocates also point out that the business arrangements between lenders and insurance companies that provide force-placed insurance are easy to abuse. Some instances have come to light in which insurers rewarded lenders with kickbacks, in exchange for those lenders working the insurers’ force-placed policies into their mortgage agreements.

CitiMortgage Force-Placed Insurance in the Spotlight

California borrowers who have been subject to CitiMortgage force-placed insurance may benefit from participation in the current class action lawsuit investigation.

Citibank’s insurance requirements have already been the subject of at least two consumer class action lawsuits. One of those actions accused Citibank of forcing homeowners to carry an excessive amount of flood insurance.

The other action claimed CitiMortgage force-placed insurance improperly allowed the bank to accept commissions from insurers Assurant Inc., American Security Insurance Company, and Standard Guaranty Insurance Company.

Citibank settled the two insurance class action lawsuits in 2014 for $110 million.

The current class action lawsuit investigation seeks California homeowners who have been subject to a CitiMortgage force-placed insurance policy within the last two years. Qualifying homeowners may be eligible for a consultation with a knowledgeable insurance attorney.