Many California homeowners struggle to make their mortgage payments, even missing payments altogether. These missed payments, among other reasons, may cause homeowners to lose their insurance.

Working together with insurance companies, some lenders like CitiMortgage, allegedly took advantage of California homeowners’ situations and began charging for force-placed insurance that the lenders put in place. The lenders reportedly received kickbacks or benefits from insurance companies.

In force-placed insurance, the lender purchases insurance to protect their asset, usually at the expense of their homeowner customer.

Essentially, force-placed insurance policies that banks buy are usually more expensive than what homeowners would buy for themselves on the open market – sometimes 10 times as expensive, according to consumer advocates.

What is Force Placed Insurance?

Force-placed insurance, also known as lender placed insurance, force-placed hazard insurance, or collateral protection insurance, can occur for several different reasons.

It may happen after a homeowner has accidentally allowed his or her original policy to lapse, or when a homeowner does not purchase coverage for a particular hazard that takes place in their area, such as flooding.

The purpose of forced-placed insurance, in theory, is to protect both the homeowner and the lien holder by guaranteeing the home remains insured.

A 2011 investigation conducted by the New York State Department of Financial Services (DFS) found force-placed insurance premiums are up to 10 times higher than those charged to people who have voluntary insurance. Despite the higher price tag, force-placed insurance coverage can be substantially limited in many instances and often covers different risks.

CitiMortgage Accused of Improper Force Placed Insurance

Headquartered in St. Louis, Missouri, CitiMortgage is a member of Citigroup and provides mortgage products as part of an expansive portfolio of financial services that includes banking, insurance, asset management, credit cards, and much more.

However, the lender is being investigated by class action attorneys over potential allegations CitiMortgage may be taking out and force-placing unnecessary insurance policies in order to receive kickbacks from insurers.

Indeed, in 2014, CitiMortgage, along with Citibank, settled a nationwide class action lawsuit for $122 million. The class action lawsuit alleged that CitiMortgage and Citibank schemed to require certain borrowers to purchase flood insurance in excess of what their mortgage contract and federal law requires.

Another example of CitiMortgage’s alleged deceptive force-placed insurance practices is a proposed class action lawsuit filed in California federal court by plaintiff John M.

Filed in October 2016, John names several companies including CitiMortgage as defendants, alleging they were involved in deceptively charging borrowers for “force placed hazard insurance”.

Force Placed Insurance Class Action Investigation

Spurred by allegations from homeowners such as John’s, attorneys have launched a force-placed insurance class action investigation. The investigation is looking into allegations associated with the practice of force-placed insurance at certain bank and mortgage lenders such as CitiMortgage.

If you are a California homeowner and your bank force-placed an insurance policy on your home, you may have been treated unjustly. Your lender may have deceived you when it force-placed insurance at an unreasonable or excessive rate, and you may be eligible to join a force-placed insurance class action lawsuit investigation and seek compensation for the improper charges you paid.