A woman has filed a lender placed insurance lawsuit against New Penn Financial, LLC, doing business as Shellpoint Mortgage Servicing.

Lender placed insurance (LPI) is also known as force placed insurance (FPI). Homeowners who have a mortgage on their home are required to maintain a homeowners insurance policy that covers the home, the home’s contents and accidents that occur on the property.

A homeowner who allows the homeowners insurance policy to lapse is apt to see the lender force an insurance policy upon the home to protect only the house itself, which is the lender’s asset. These lender placed or force placed insurance policies often cost the homeowner a much higher fee than if the homeowner purchased a policy on his or her own.

Dorothy C. is seeking class action status for her lender placed insurance lawsuit alleging Shellpoint manipulated the lender placed insurance market by instituting collusive agreements that included kickbacks and other forms of improper compensation at the expense of borrowers who paid undisclosed and illegitimate costs for lender placed insurance.

Shellpoint manages residential loans after mortgage lenders originate the loans. According to Dorothy’s lender placed insurance lawsuit, Shellpoint has become the nation’s 15^th largest non-bank mortgage servicer, managing 233,033 loans with an unpaid balance of more than $57 billion as of April 30, 2018.

The lender placed insurance lawsuit alleges Shellpoint “engaged in a pattern of unlawful and unconscionable profiteering and self-dealing in the purchase and placement of FPI cover on behalf of Shellpoint borrowers in Florida and throughout the country.”

Lender Placed Insurance Lawsuit Allegations

Dorothy claims Shellpoint allegedly entered into exclusive agreements with insurance agents including Overby-Seawell Company and Proctor Financial Inc. to monitor all of the Shellpoint loans and to certificates of insurance through exclusive, single-interest master policies from surplus lines insurers National Fire & Marine Insurance Company, IronShore Europe Limited, and certain underwriters at Lloyd’s, London.

The lender placed insurance lawsuit alleges the master policies cover Shellpoint’s entire portfolio.

The insurers and agents allegedly provide Shellpoint with a number of different kickbacks designed to appear as legitimate compensation. Allegedly labeling the kickbacks “commissions” and “expense reimbursements” and offering Shellpoint free or below-cost mortgage servicing functions that have nothing to do with the lender placed insurance are among the ways Shellpoint obtains essentially a rebate on the cost of lender placed insurance.

Dorothy alleges none of the cost savings reaches the homeowners who ultimately pay the cost of the kickbacks through alleged higher than justifiable lender placed insurance payments.

According to the lender placed insurance lawsuit, Shellpoint allegedly “attempts to disguise the kickbacks as legitimate when, in fact, they are unearned, unlawful profits.”

In her complaint, Dorothy says she is not challenging Shellpoint’s contractual right to obtain lender placed insurance, but is challenging the method Shellpoint uses to enrich itself and the insurance companies at her expense, in violation of the mortgage agreements.

The Lender Placed Insurance Lawsuit is Case No. 9:18-cv-80948-RLR in the U.S. District Court for the Southern District of Florida.