CitiMortgage Insurance is among the companies that have agreed to settle class action lawsuits over force-placed homeowners insurance in California.

Force-placed insurance is a practice that has been making millions of dollars for insurance companies and for the banks.

Promoted as a consumer protection, force-placed homeowners insurance in California allows the bank that holds your mortgage to buy property insurance for you if your policy lapses due to non-payment.

That way, there is no lapse in coverage in case an unforeseen events damages your home.

This sounds like a great plan because homeowners don’t want to pay a mortgage on a home that is no longer safe to live in, nor do homeowners want to walk away from a mortgage. The bank doesn’t want to put you in that situation, either.

CitiMortgage Insurance Settled Previously

Back in 2014, CitiMortgage Insurance settled a lawsuit for two classes, the Flood Settlement Class and the Hazard/Wind Settlement Class.

The Flood Settlement Class included anyone charged by CitiMortgage Insurance for lender-placed flood insurance in connection with a mortgage loan, home equity loan or home equity line of credit taken from May 17, 2006 through April 2, 2014.

Similarly, the Hazard/Wind Settlement Class included those charged by Citi lender-placed hazard/wind insurance in connection with a mortgage loan, home equity loan or home equity line of credit taken from May 17, 2006 through April 2, 2014.

The only exclusion was if the charge already had been flat cancelled and fully refunded.

CitiMortgage denied any wrongdoing, but agreed to settle to resolve the allegations of unlawfully forcing people to carry excessive flood insurance and for profiting from the force-placed hazard insurance.

What Is Wrong with Force-placed Insurance?

When a bank purchases a homeowners policy on behalf of the mortgage holder, the policy can be as much as 10 times more expensive than what the homeowner could purchase on his own.

Both banks and companies that sell force-placed insurance insist this price discrepancy is because they must insure all homes; they are not able to assess the homes that are at the least risk of claims.

Force-placed homeowners insurance in California does not carry the same level of coverage as a standard policy, though. Most force-placed policies will not pay for lost possessions or the cost of staying somewhere else while a damaged home is fixed.

The biggest complaint regarding force-placed insurance is the allegations that banks receive kickbacks, often called commissions, from the insurance companies that sell force-placed insurance. Regulatory oversight has diminished this practice, but the tradition has created an environment less than forgiving when a consumer misses an insurance payment.

Lawsuits Hold Companies Accountable

Homeowners have filed and won lawsuits against banks that have gouged them for force-placed homeowners insurance.

If you have been required to pay force-placed homeowners insurance by CitiMortgage Insurance or another company in California, you could benefit from a class action lawsuit.