One Homeowner’s Forced-Placed Insurance Tale of Woe

Turners Falls, MAThe potential limitations of Force-Place Insurance and the added cost is reflected in the sad story of one homeowner from Turners Falls who experienced a fire in her home. Lender Insurance, as it has been widely reported, tends to be more expensive and offers less coverage than more traditional insurance products.

According to The Recorder (Greenfield, Massachusetts 1/11/16), a fire started in Amanda Pitchford’s bedroom in the night following a quick trip to the washroom. Pitchford is reported to have habitually left a candle burning, although it was unclear if the candle was the source of a fire that began within the linens of her bed.

Returning to her room to find her bedsheets in flames, Pitchford did her best to douse the flames with a fire extinguisher she had at the ready. However, it was reported that the plumes of foam succeeded only in spreading the flames to a tapestry that hung above her bed.

Firefighters are reported to have arrived within four minutes, but to no avail: the two-story wood-frame structure was devastated by the fire. It was reported that she had no insurance coverage for contents.

What Pitchford did have, however, was a Lender Insurance policy on her home, a Force-Place Insurance policy implemented by Ocwen Financial. Pitchford did not divulge the circumstances behind the need for the forced-placed insurance terms, but The Recorder did note that the homeowner’s premium was set at $2,251 per year.

Thus, it was with surprise when Pitchford learned that in spite of a high premium, her force-placed insurance coverage did not include any of the standard benefits for emergency clothing and shelter reimbursement, personal property damage, or tenant relocation coverage.

The Recorder took note of the $140 million settlement Ocwen was mandated to pay by a federal court in Florida following a Force-Place Insurance class action in 2015. Ocwen was accused of inflating the cost of forced-placed insurance premiums.

That settlement is indicative of the state of the forced-placed insurance industry, which has been at the receiving end of Forced-Placed Insurance Lawsuits and related settlements amidst allegations that insurers and mortgage underwriting companies have cozied up in a scheme involving kickbacks and other incentive payments that are borne on the backs of unsuspecting homeowners, or so it has been alleged.

Mortgage underwriting companies have the legal and ethical right to force-place insurance on a mortgaged structure if it is found that the owner, for whatever reason, has allowed insurance coverage to lapse - or coverage has been found to be inadequate. Hence, mortgage underwriting companies have the authority to force-place insurance in order to protect the investment.

However, there have been wide allegations - supported by lawsuits - that Lender Insurance policies are more expensive, with less coverage than standard-issue policies. It is alleged that premiums are inflated, with kickbacks and other payments borne on the backs of unsuspecting homeowners.

Plaintiffs have alleged that force-placed insurance terms have included coverage that wasn’t necessary or exceeded the mortgage company’s investment.

It is not known if Pitchford has filed a Force-placed insurance lawsuit…