Consumers with a forced placed mortgage insurance policy may be eligible for compensation via legal action based on allegations that the forced placed practice may be deceptive and in violation of consumer protection laws.

As a part of many mortgage agreements, homeowners are required to maintain hazard insurance to protect against potential natural disasters and damage. The required homeowners’ insurance often includes flood insurance, earthquake insurance, wind damage insurance and other types of insurance depending on location and the agreement terms. However, insurance policies may lapse for a variety of reasons including failure to pay, cancellation, withdrawal or a simple mistake.

When homeowner insurance lapses for any reason or is deemed to be insufficient in the eyes of the bank, lenders may inform consumers that they are securing a forced placed mortgage insurance policy.

Forced placed mortgage insurance policies allow the lender to protect their interests, but it may be much more expensive than a normal insurance policy. Paying for these policies are often the homeowner’s responsibility, and it can cost up to ten times the amount of normal insurance.

The amount can be added to the monthly loan payment, causing serious financial burden to the consumer. Because mortgage lenders are often not the ones paying insurance premiums, they have no incentive to find the cheapest option and leave consumers to pay significantly more than they would have if they had pursued insurance themselves.

Although this practice is not inherently illegal, many lenders face allegations that they are overcharging for insurance policies in exchange for kickbacks from insurers. These lenders are allegedly entering into agreements with insurers where the insurer overcharges consumers for their policies and then gives a portion of the overcharged premiums back to the bank.

This incentivizes lenders to seek forced placed mortgage insurance policies with these insurers at the expense of the consumer. Other lenders face allegations that they secure forced placed mortgage insurance when it is not needed or apply policies retroactively.

In response to consumer outrage and complaints, the Consumer Financial Protection Bureau (CFPB) issued new regulations regarding forced placed mortgage insurance policies in 2013. These new regulations were issued in an attempt to protect consumers by requiring lenders to have a reasonable basis for imposing a new policy and to inform their consumers before enacting a forced placed mortgage insurance policy.

Although the CFPB has issued new regulations to protect consumers, many individuals still allege that lenders are engaging in unfair and deceptive practices in regards to forced placed mortgage insurance.

Mortgage lenders under investigation for their forced placed mortgage insurance practices include AmeriHome Mortgage, Arrest Bank, Dovenmuehle Mortgage, Freedoms Mortgage Corp., Lakeview Loan Servicing, LoanDepot, Matrix Financial Corp., Pingora Loan Servicing, Provident Funding, Quicken Loans, Residential Mortgage and Shellpoint Mortgage Servicing.

If you are the customer of any of the above mortgage lenders and were secured a costly forced placed mortgage insurance at your expense, you may be eligible for a lawsuit against your lender. A forced placed mortgage insurance lawsuit could help recover the excessive premiums paid.