Controversy Continues Over Force-Placed Insurance

As the mortgage industry continues to rebound under stricter loan servicing regulations, insurance companies, banks and other financial firms continue to come under fire for force-placed insurance practices.

Many homeowners have begun to file lawsuits against their bank or loan servicer alleging force-placed insurance policies are much more costly than traditional hazard insurance and could be a conflict of interest for some financial institutions.

What is Force-Placed Insurance?

When a homeowner’s hazard, flood or wind insurance policy lapses for any reason, banks, lenders or loan servicing companies, often force the homeowner to purchasie policies with substantially higher premiums. This is commonly referred to as force-placed insurance.

These force-placed insurance policies, while not illegal, often provide unnecessary or duplicate coverage because they are backdated to collect premiums for periods of time when the homeowner has no risk of loss.

These actions are utilized by banks to increase their bottom line. Banks often establish arrangements with a force-placed insurance provider that has agreed to share premiums with a subsidiary of the bank. These payments may represent unlawful kickbacks to the bank.

Controversy Over Force-Placed Insurance

According to a recent article, banks and mortgage service companies have agreements with insurance companies to buy policies on behalf of a homeowner whose insurance coverage has lapsed.

The ability to provide force-placed insurance allows banks to protect properties, in case of disaster, for which they hold the mortgage. The bank forwards the premium to the insurer, the insurer pays a commission to the bank and the homeowner is billed for the premium and commissions.

While forced-placed or lender insurance may seem justifiable, the controversy over the practice is called into question when the lender purchases force-placed insurance to protect their asset, but at the expense of their customer.

Essentially, the force-place insurance policies the 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.

The banks and the companies that sell force-placed insurance say this is because they have to insure every house they’re presented with, rather than picking and choosing the least-risky ones.

Force-Placed Insurance Class Action Lawsuit Investigation

A class action lawsuit investigation has been launched into what appears to be an industry-wide practice of banks and lenders overcharging homeowners for “force-placed insurance.” Some of the lenders being investigated include:

• S. Bank
• BB&T Bank
• Quicken Loans
• LoanCare
• Fifth Third Bank
• Provident Bank
• Seterus Inc.

If your bank force-placed an insurance policy on your home, your bank may have treated you unfairly. 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 class action lawsuit investigation and seek compensation for the improper charges you paid.

Join a Free Force-Placed Insurance Class Action Lawsuit Investigation

If you paid for force-placed insurance from a lender, you may be eligible to join a free class action lawsuit investigation into the improper charges you may have paid.

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