Run On Force-placed Insurance Settlements?

If you have ever had a bank force-place* insurance on your home, you know what they charge has been much higher than what insurance companies would have quoted to you. A rash of lawsuits against Banks and Mortgage Servicing Firms alleges several firms have been receiving Kickbacks for sending the business to certain insurance companies. In the last 18 months, several settlements have taken place.

[alert style=”warning”]*Force-placed insurance refers to a bank or servicer directly arranging for insurance on a mortgaged property, with the mortgagee as the beneficiary in order to protect their collateral in case of damage while the loan is still outstanding. The bank, mortgage company, or servicer then charges the homeowner for the policy. [/alert]

Lawsuits Happen when Insurance is Force-placed!

In a class action lawsuit against PNCplaintiffs alleged that American Security Insurance Company, Voyager indemnity Insurance Company, Standard Guaranty Insurance Company, or other insurance paid all or a portion of the policy to PNC. PNC Settled the lawsuit in December 2015.

In Hall, et al. v. Bank of America NA, et al., Case No. 12-cv-22700, a class action lawsuit against Bank of America (and BAC Home Loans Servicing LP or Countrywide Home Loans). Plaintiffs alleged that balboa insurance Company, Meritplan Insurance Company, Newport Insurance Company or any of their affiliates offered kickbacks to Bank of America in exchange for using their insurance products. Settlement class was due either 6.5% or 5% depending on class category. Total Settlement: Confidential. (The plaintiff’s attorney fees were capped at 16% and the plaintiff’s attorneys were awarded no more than $16 million. You can take it from here.)

In a class action lawsuit against JPMorgan Chase Bank; Chase Insurance Agency, Inc., Assurant, Inc. American Security Insurance Company, Standard Guaranty Insurance Company and Voyager Indemnity Insurance Company; Settled in February 2014; the settlement class was due a partial refund of 12.5% of the net premiums. Total settlement: $300 million!

The class action lawsuit against Ocwen, a large mortgage servicing firm, received final approval on September 14, 2015. The plaintiff in Lee vs Ocwen Loan Services Co. alleged that under a collusion between Ocwen and Assurant (and its subsidiary, American Security Insurance Co.), kickbacks cost unsuspecting borrowers hundreds of millions of dollars annually. The settlement class was due a partial refund of 12.5% of the net premiums. Total Settlement: $140 million.

But Wait…There’s More!

Nationstar Mortgage LLC and Assurant Inc. agreed to settle the class action lawsuit alleging Force-placed insurance kickback allegations January 30, 2015. Total Settlement $54 Million.HSBC Mortgage Corp settled claims of kickbacks for insurance policies forced on properties through Assurant Inc. and Voyager Indemnity Insurance Co. Total Settlement: $126 million.

US Bank NA settled claims it retroactively applied force-placed insurance then charged homeowners for time that had already passed.

It appears, Banks have been put on notice. It would be great, if practices are changed. Some settlements I reviewed required a period of tracking and adhering to criteria…but other settlements have shown banks, lender and servicers do not always cooperate. Time will tell.


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