Force-Placed Insurance Policy. The lawyers at our firm are offering free consultations to consumers victimized by force-placed insurance policies. Also known as lender placed insurance policies, this is insurance that banks and other mortgage lenders force consumers to buy. In many cases, lenders use force-placed insurance policies to take advantage of borrowers.
If you believe a lender has taken advantage of you through a force-placed insurance policy, you may be entitled to compensation. Our force-placed insurance policy lawyers are investigating potential class action lawsuits on an ongoing basis against lenders who engage in deceptive and unfair lender placed insurance policy practices. If you are interested in joining our lender placed insurance policy class action lawsuit, we urge you to contact us right away to protect your legal rights.
Class Action Lawsuit Against Suntrust, QBE in Progress
Parker Waichman LLP has filed a class action lawsuit in a California district court alleging that Suntrust Mortgage Inc. requires some of its borrowers to purchase force-placed insurance policies (which Suntrust has previously purchased from QBE Insuance Corp.).According to the lawsuit’s Complaint, as a condition to its funding loans for some borrowers, Suntrust requires the borrowers to purchase and maintain hazard insurance coverage for the secured property. When any borrowers fail to maintain their hazard policies, Suntrust replaces the initial policies with more expensive ones, known as force-placed, or lender-placed, policies, according to the Complaint.
In this case, Suntrust forces borrowers to pay for force-placed policies by diverting monthly mortgage payments and/or debiting borrowers’ escrow accounts; these replacement policies nearly always provide less coverage, and are priced substantially higher, than the initial policies.
Deceptive Lender Practices
Suntrust, as noted above, is taking advantage of typical home mortgage agreements, which generally include a promise to maintain a homeowner’s insurance policy on the house. Many people don’t realize that if they let that insurance lapse, banks and other lenders can do what Suntrust does: replace it with another policy that the homebuyer has to pay for.
Our force-placed insurance policy lawyers have found that many lenders take advantage of this mortgage provision as an excuse to increase the fees they charge to borrowers. Lender placed insurance policies are almost always more expensive than insurance coverage you can purchase yourself. There have been many instances when lenders have forced these policies on borrowers who do not need them simply to increase their profits.
In addition to being more expensive than a policy you can buy on your own, lender forced insurance policies almost always offer the borrower less protection. The primary purpose of a force-placed insurance policy is to protect the mortgage holder, not the property owner. Such a policy may not insure the full value of your home, only the amount covered by your loan. Most force-placed insurance policies do not insure the contents of a property. In either case, you could sustain a substantial loss if your home is damaged or destroyed.
Mortgage loan documents usually allow the lender to force place insurance when the homeowner fails to maintain the insurance, and to add the premium to the loan balance. However, our force-placed insurance policy lawyers are aware of cases when predatory lenders force-placed insurance even when the homeowner had insurance.
Lender placed insurance should only be placed when a lender receives information that a borrower’s insurance policy has lapsed. Once a lender receives evidence that a borrower has once again obtained insurance, the force-placed coverage should be fully or partially canceled.
Often, when lenders purchase insurance on a borrower’s behalf, they will opt to buy an exorbitantly priced policy. Our force-placed insurance policy lawyers are aware of cases when borrowers were charged premiums three times higher than what a consumer would pay on the open market. Often the insurance carrier is a company affiliated with the lender, and the force-placed insurance is padded because it covers the lender for risks or losses in excess of what the lender may require under the terms of the loan.
Our force-placed insurance lawyers have also learned of lenders that charged borrowers more than the actual cost of an insurance policy. Retaining commission in this way is improper, and a borrower is entitled to have the excess cost refunded.
Other Lenders May be Issuing Unfair Force-Placed Insurance Policies
Our firm is currently investigating a number of other class actions lawsuits over force-placed insurance policies, including the below banks:
- US Bank Home Mortgage
- One West Bank
- Nationstar Mortgage
- Ocwen Financial Corp.
- MetLife Home Loans
- Ally Financial
- PHH Mortgage
There is evidence that these lenders may have unfairly issued force-placed insurance policies. This so-called lender placed insurance is only appropriate if there is an actual lapse in insurance. In some cases, however, borrowers may have been forced to buy a force-placed insurance policy even though they were fully covered. Banks may have committed these unlawful actions for their own financial gain. Unfortunately, it appears that the institutions who are supposed to help people with their money troubles may have only taken advantage.
According to Courthouse News Service, numerous class actions and lawsuits have been filed over force-placed insurance policies. For instance, in 2013 a class action lawsuit alleged that insurers with ties to OneWest Bank worsened the foreclosure crises and took advantage of elderly clients by forcing them to pay exorbitantly high force-placed products. The suit alleged that lenders often force-place insurance products when a policy lapses without giving customers the opportunity to research more affordable options. The Plaintiff alleged that her annual premium for homeowners insurance was $384 through the California FAIR Plan. When the policy lapsed, she was charged a $2,754 annual premium through force-placed insurance.
In August 2014, Insurance Journal reported that Nationstar Mortgage was looking to sell Harwood Service Co., an insurance agency that did not appear to exist. Harwood was simply a name that referred to Nationstar, said call-center employees of Assurant Inc., the insurance carrier whose policies were sold by Harwood. Reportedly, Harwood collected commission on force-placed insurance products imposed on its borrowers. Recent rules now prevent servicers from collecting commissions on these policies, but it appears that some companies try to circumvent this. They are selling or have sold insurance agencies that essentially do not exist. According to Insurance Journal, Nationstar collected over $40 million on more than $200 million worth of insurance billed to homeowners through Harwood.
Nationstar and Assurant Inc. agreed to settle a class action lawsuit in the U.S. District Court for the Southern District of Florida in August 2014. The suit alleged that Harwood only existed as a means to “funnel profits” to Nationstar at the expense of the borrower.
If a lender does force-place a hazard, flood or wind insurance policy on your home, they are required to let you know. Furthermore, the lender is only supposed to charge you for the insurance itself; there should not be any extra fees or commission. Banks should not be profiting off of you through lender placed insurance, but unfortunately that may be the case for some borrowers who are getting charged excessively high premiums. If you can buy a policy on your own that meets a lender’s requirements, then the force-placed insurance policy should be cancelled and the unused portion of the premium should be refunded to you. If you think that you may have been a victim of an unfair force-placed insurance policy, contact Parker Waichman LLP today to find out about joining a class action lawsuit.
Avoiding Force-Placed Insurance
In most cases, when a consumer has a mortgage, insurance premiums are added to their mortgage payment. The bills and other communications from the insurance company are sent directly to the lender. While this arrangement is usually convenient for all parties, it can set up an opportunity for a creditor to take advantage of a borrower with a force-placed insurance policy.
Under such an arrangement, if an insurance company decides to cancel a policy, it may only inform the lender. Our force-placed insurance policy lawyers know of many cases of a lender, having learned that an insurance policy was about to be canceled, purposely failed to inform the borrower. Once the policy lapsed, the lender imposed a more expensive force-placed insurance policy.
The most important thing a consumer can do to avoid force-placed insurance is to keep their insurance policies current. If you pay your premiums into an escrow account, make sure that your insurer provides you with copies of any correspondence – especially cancellation notices – that it sends to your lender.
If your insurance policy is canceled, most states require that the insurance company provide enough notice so that you have time to find another policy before the old one expires. If you receive a cancellation notice, start shopping for new insurance right away so that your lender is not able to impose a force-placed insurance policy. Remember, any policy you obtain on your own is likely to cost less than a policy a lender provides.