Force placed insurance, or lender placed insurance, is an insurance that a mortgage lender can require a homeowner to pay if they let their home insurance lapse.

When you take out a mortgage to purchase a house, while you are borrowing money for the house, the house is still the bank’s asset. Homeowner’s insurance protects a house, so if a homeowner lets their homeowners’ insurance lapse and they still owe money to a bank, the house, and thereby the bank’s asset is at risk and uninsured.

Generally, every mortgage requires the homeowner to have homeowner’s insurance to protect the bank’s asset, and every mortgage permits the bank to purchase homeowner’s insurance of its choice and require the homeowner to pay for it, in the event that the homeowner lets their own insurance lapse.

Homeowners can let their insurance lapse, leaving their home uninsured and unprotected, for a variety of reasons. If a person fails to pay their premiums, if the insurance provider cancels a policy, homeowners’ insurance can lapse. Sometimes, a simple oversight or clerical error can cause insurance to lapse.

High Costs of Force Placed Insurance

Though banks are legally allowed to apply lender placed insurance coverage, consumers are fighting back against the high costs of force placed insurance.

Many consumers claim that force placed insurance costs many times what they would otherwise pay in homeowners’ insurance. Reportedly, lender placed insurance coverage can be anywhere between four and ten times the cost of normal homeowners’ insurance.

Banks and insurers claim that the costs are so high to offset the risk they incur when they insure homes that have lapsed insurance, because they have to insure every uninsured house this way, not just houses that present the least risky cases.

In contrast, many consumers claim that this is not the true reason for the high cost, instead arguing that banks are intentionally and avoidably gouging consumers.

Additionally, many consumers claim that banks receive kickbacks from insurers they use in cases of lender placed insurance coverage. A “kickback” is a profit a bank gets when the insurer that insures a home pays the bank a portion of each premium the bank brings to insurers. This practice is illegal, but unfortunately widespread.

How to Fight the High Fees of Lender Placed Insurance Coverage

To fight suspected abuses in forced placed insurance, the Consumer Financial Protection Bureau requires mortgage companies to have a justifiable reason for imposing the coverage, and must notify a homeowner before applying this kind of coverage.

Consumers are fighting back against high force placed insurance rates by taking legal action. Joining a homeowners’ coverage class action lawsuit could help you gain compensation for unreasonably high insurance premiums imposed on you by your bank.

If your home insurance lapsed and your mortgage company imposed replacement coverage at your expense, you may have a legal claim. Mortgage borrowers who paid or were charged for force placed insurance during the past five years from one of the following companies may be eligible to join a lender placed insurance coverage lawsuit.

• 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
• Shellpoint Mortgage Servicing