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Force-Placed Insurance Attorney Weighs In

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Washington, DCForced-place insurance lawyer Lorenzo Cellini, with Tycko & Zavareei LLP, is currently investigating force-placed insurance claims. If you are a homeowner, read on - this bad faith insurance practice could affect you. Force-placed insurance targets all homeowners because all homeowners are required to carry property insurance. Mr. Cellini’s advice could save you a lot of money and avoid a whole lot of grief.

LawyersandSettlements (LAS): What is the practice of force-placed insurance?

Lorenzo Cellini (LC): When a person takes out a mortgage to purchase his or her home, the lender requires as part of the terms of the loan that the homeowner maintain property insurance to protect the home in the event of a disaster. If the homeowner allows the property insurance policy to lapse, then the loan agreement allows the lender to purchase a new policy to protect the bank’s investment and then bill the homeowner for it. It is also known as “lender-placed insurance.”

LAS: Why is Force-Placed Insurance unlawful?

LC: Although the practice of force-placing insurance in and of itself is not unlawful, it became common within the mortgage industry for banks to partner with insurance companies that would charge consumers a premium for their force-placed insurance policies, in some cases many times above the market rate. A portion of this premium was then paid to the bank as a “kickback” for allowing the insurance company to force-place its policies on the banks’ borrowers.

LAS: The illegal aspects are kickbacks and retroactive billing. But without these two practices, the insurer and lender are within their rights to charge the homeowner?

LC: Unfortunately, yes. Under terms of loan agreements, the vendor requires you, the homeowner, to carry insurance in the event of disaster such as flood, fire, hurricane, etc. If you don’t purchase the policy, they have the authority to buy it on your behalf and they bill you for it.

Under their loan agreements, they have the authority, but in an industry-wide practice, banks partner with certain insurance companies and allow them to monitor banks loans to see if the borrower’s policies for property insurance had expired. And if so, they would charge way above market rates.

LAS: So financial institutions and insurance companies are in cahoots, working together to bilk the homeowner? That sounds very devious.

LC: It is devious. Abusing your contractual relationship is illegal and it takes unfair advantage of the contract you have with the consumer. You are not acting in good faith. Both sides are acting in bad faith and conspiring against the homeowner.

Through partnership with a lender (such as your bank), they charge a premium for the policy that they force-place and then they remit a portion of that premium to the bank in exchange for allowing them to have this partnership in the first place. In other words, they get an illegal kickback, as I mentioned above.

LAS: And if they find a policy that has lapsed, they will make even more profits at the homeowner’s expense.

LC: Yes. In some cases force-placed insurance was billed to homeowners retroactively. In other words, homeowners were billed for property insurance during the period of time that their previous policy had lapsed, in addition to being billed for a new policy going forward. Also, there have been reports suggesting that homeowners have been billed for forced-placed insurance even though they already have a policy that covers their home.

LAS: It sounds like the homeowner doesn’t get notified when it is time to renew their property insurance.

LC: You’re right, the homeowner is not notified if their policy has lapsed - the lender will notify by way of sending you a bill. They will send you an invoice for the new policy and sometimes they will also bill retroactively for the amount of time the policy has lapsed. For instance, your policy lapsed three months ago so here is what you owe us.

LAS: The homeowner cannot just say NO?

LC: There is not a whole lot that you, the policyholder/homeowner, can do at this point. If you don’t pay the premium, you are technically in default and the bank has the right to foreclose on your home. Of course, you can complain or plead to get the bank to remove the charge, but if the financial institution refuses, you, the homeowner, will either have to pay up or be at risk of defaulting on your loan. Once you get behind on your loan, the cost of servicing it goes up and up, and you get stuck in a very difficult situation.

LAS: There has to be something homeowners can do to protect themselves and prevent this bad faith practice from occurring.

LC: One thing they can do: Buy a new policy from a market rate insurance company once the force-placed policy is expired. But there is nothing they can do now. And check your policy today to find out when it expires.

LAS: Will there be a forced-place insurance class action anytime soon?

LC: We are currently investigating the potential of bringing a class action. If we are satisfied that we have identified an individual who was victimized by this practice that we believe is unlawful, we do intend to bring a force-placed insurance class-action lawsuit - against these lenders in particular:

Fifth Third
PHH Corp
MetLife Bank
Nationstar Mortgage
Provident Funding
Regions Financial

LAS: When you mentioned earlier that homeowners need to carry insurance due to the forces of Mother Nature (such as hurricanes and flooding), do you see this practice occurring in states more affected by natural disasters? In other words, the more clauses in your policy, the more chances of getting ripped off?

LC: We believe it is a national problem and there is ongoing litigation brought in a variety of different states, from Florida to California. At the same time, insurance fees can vary from state to state and by the individual.

LAS: Can you file an individual force-placed insurance lawsuit?

LC: Yes. In some cases individuals can get billed for a substantial amount if they have let their policy lapse - if they have been without insurance for some months. For example, in a case filed against Wells Fargo, one of the plaintiffs was billed an annual premium of force-placed insurance for $25,000. In that same case, another plaintiff whose policy lapsed 30 days was charged $1,700 for that one month alone. It is expensive.

LAS: If the homeowner believes they have been unlawfully charged, would you advise they file an individual claim or wait for a class action?

LC: It would depend upon your circumstances. If you did get billed thousands of dollars, then you may want to consider proceeding on your own and hire a Forced-Place Insurance lawyer. But if it is just one month, like the above incident, there may not be enough money to proceed, which is why we are investigating a Force-Place Insurance class action. And we believe thousands upon thousands of people have been subjected to force-placed insurance terms.

One more piece of advice: This is an industry-wide practice that behooves consumers to make sure their policy is in place so they don’t end up in this situation.

Since joining Tycko & Zavareei, Mr. Cellini has practiced primarily in the area of civil litigation. He has represented both individuals and companies in a variety of civil disputes involving real estate, unfair competition, employment, False Claims Act, products liability and consumer class-action law. In addition, Mr. Cellini has represented individual tenants and tenants’ associations in connection with preserving and enforcing their rights under the laws of the District of Columbia. Before joining Tycko & Zavareei LLP, Mr. Cellini practiced law in Tucson, Arizona. He specialized in commercial litigation, with an emphasis on contract disputes, real estate, intellectual property and bankruptcy. Further, while in law school, he served as a law clerk in the Antitrust Division of the U.S. Department of Justice, where he assisted in investigations of anticompetitive conduct and proposed mergers. Before attending law school, he worked in the Federal Trade Commission’s Bureau of Competition.


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Posted by

My mortgage company force-placed insurance on me, however, I never had knowledge of it for two years. After numerous phone calls and letters they would always say there was a lapse of coverage for one month and, therefore, they force-placed the ins. After talking to my insurance co. I was advised that no lapse of insurance occurred during the time that my wife and I purchased the property. I then forwarded a copy of this letter to the mortgage company. After several months no response was ever received. Shortly after that letter I received another letter saying that I did not pay my taxes. Once again, I contacted the tax office, in which they confirmed my taxes were up to date. This letter was again forwarded to the mortgage company, and again no reply was received. so all this time I thought I was paying my mortgage, but instead after taxes and insurance,their was no money left for the mortgage Next was letters threatening foreclosure. Once again I sent another letter stating if they did not contact me within twenty days I would terminate the mortgage payments and put all money into a court escrow. Finally we went to pretrial in which the judge refused Citi mortgage to foreclose. and ordered mediation
in which little was said by them. Even though we could win, due to severe medical conditions and finance problems, we could not pursue the matter at that time. During this period I did get a letter from citi mortgage admitting that I did have a non escrow account but they still continued to deduct for taxes, ins, penalties, fines , and etc. The actual balance on the house was 98,000 but the final judgement total was 138,000. All research and documents by two lawyers have already been completed. I need representation along with experience. Thank you for your time and understanding in this matter. Hope to hear from you.

Posted by

I am attempting to refinance a loan currently at Wells Fargo, previously at Wachovia. I am going to finance with another lender. Wells Fargo claims I owe $6020 of unpaid insurance for one year of coverage from 2010 to 2011 although I have never been uninsured since I bought my home in 1986. USAA sent proof of continuous coverage on 2/2/2011 when this first came up and I thought it was handled. I have never had even a one month lapse in my insurance. When I inquired another time I was told that the $6000 was the total premium for the credit life insurance that I would be paying off monthly until my 30 yr. loan matured. The math worked out as in the ballpark so I believed it. Imagine my surprise when I tried to close my home equity refinance last week and was told I owed $6020. It is clearly a bogus charge but how did it get there and why was I lied to about what it was?

Posted by

My Wife and I just bought a Home under the Rural Home Loan Program (Government Garanteed) this June., 2013. We had ReMaxx and great Mortgage Agent (We left Chase). we met all the Federal and Lender requirements and demands and closed. We obtained, paid for and escrowed all future Hazard Coverage and FEMA Flood Insurance required by the Federal Agency and Lender into a they required. We have been direct electronic payment to the Servicer each month...we are on time and up to date. recently Well-Fargo purchased our Mortage and seems not to like the terms of the Mortgage we have,and so has considered their purchase of our Mortgage as a "New Loan" and thus a trigger for Forced Placed Insurance!!! They say we have become "inadequate in our Flood Insurance Coverage!!!! Since when? Our present pre-paid for Hazard Insurance pays for replacement and our purchased Flood Insurance covers the 100% of the Principle with the Federal Government Garanteeing the Principle as well...all this was demanded of us by the Federal Program and the Originating Lender before we signed off and closed!!!! I was well informed of the FEMA Rules, the Fedral agency Rules and the Requirments of the Lender. Is Wells Fargo corrupt? Do they think they can purchase a Loan and rewrite the Legal and binding Contract My Wife and I made in conjuction with the Federal Program and original Lender??? They act as if they either have no clue as to the Federal and State Laws that protect Borrowers. We have all the proper documentation etc! Our Mortgage Broker is stunned....we have lived in our New Home for less than 4 Months and no this garbage? They will effectively Force Place us out of our ability to pay our Mortgage and Foreclose!!! I have 8 kids under 17, I am fully dissabled and on a fixed Income and My Wife works for less than $12.00!!!!!! We moved from Oregon!!! What can we do? We cannot afford at this time to purchase more Flood insurance.....and since 1922 (Year Home was Built) this House has NEVER been Flooded!!! The Property (1 Acre)....yes...topping the drive way. And we Live in Cold Spring, MN --- on a Surveyed and Fema updated Mapping area known AE. This Home has never been touched by any of the floods along the Sauk River that is 1 quarter mile away. What are we to do? All they want us to do is show proof we have coverage they deem adequate, or in 45 days they will force place us outof House and Home! They are right that when they make NEW LOANS they can requrie whatever coverage levels they deem fit...well beyond that ofthe FEMA and Rural Home Loan Agency...but they are not the ORIGINATING LENDER!!! They are the Purchasing Bank and are bound to the Stipulations of the Mortgage, just as we do! I made no Contract with them? They cannot modify a Contractual and Binding Agreement they purchased? Why should we pay for their Buyer's Remorse?!!! Help US!!! B of A and WellFargo are well known for this and worse in Minnesota Ihave just found out. Sincerely, Kenneth and Amy Huffman

Posted by

I have Chase. I had my own insurance included in the mortgage. I would have to call Chase every Month to pay my insurance. Thats their job. Then they took and let my insurace drop and placed me with this flood insurance that is 3 times the payment. What happens after is the insurance company want to charge you in another call of insurers for not having insurance and you end up paying higher rates. If my insurance was paid by Chase I have a lower payment. Plus they never paid my taxes that were included in the mortgage. Same thing have to call the Town then Chase and back and fourth till Chase paied it.

Posted by

Now forced place Insurance is a common tactic of PREDATORY LENDERS, such as SELECT PORTFOLIO SERVICING INC.. Who is not listed above, what they do is try and claim that they consider your insurance is not valid. Then they take out a forced placed insurance policy. Chargeing the homeowner an inflated fee for, and if the homeowner fails to pay their claim. They then convert the balance claim of the Insurance policy to Mortgage Payments, then use it to Foreclose on a property. Now during the foreclosure action they will claim that you failed to have a homeowner insurance policy.
Additionally when they send you a letter about the insurance they will also demand that you have a insurance policy in the amount of the market value of the property. When in fact Federal Laws state you only need a policy in the amount of the Mortgage Note only.
Attention to Pennsylvania people any claims of Fraud due to insurance, in a foreclosure Action. Means that the Foreclosure Action has to be transffered to the Federal Courts. A State Judge has NO Jurisdiction over the claims, whereby, if a state court judge makes a ruling on the charge. Then the Judge is committing TREASON for making a ruling on subject matter which they hold NO jurisdiction over.

Posted by

on read this and you know whats going on. Website for victims claim form the government ordered / handled refunds.Fill out and claim also your downpayement. If you are homeless give them your Lat/Long they have to refund,you'll have a home again. Thank You Governor Como of NY State !In Florida it gets even better, especially after the wellsfargo Lawyer
was challenged with the affiliation (Kick back)question by the HUD -chief last friday. Yes or NO? He refused to answer,under oath and 10 feet away from him a US MArshall with his set of handcuffs on his belt. No answer means Yes - definitely there is affiliation,big time affiliation. In Florids the following is in the works: 24000 classactionmembers were drummed up.WellsFargo CEO , with his annual 21 million take-home income had the courtesy to turn 19 Million $ and cutaway the bribe for the lawyers 5 millions,for their lousy work. Federal Judge Robert N.Scola is dragging on, he wants to hear more from the homeless homeowners,more from the victims and waits for that supersmart lawyer,who even goes into the Florida statutes where it says : Consumerprotection ,Premiums of insurers can not hike higher the 10% p.a. Here again Lawyers work for themselves ,not really for you. You can either get your downpayement back or you take the house from them, if you have defaulted(or Lis Pendens,or foreclosed,if you are foreclosed you missed your turn in court !..and the bank did not) because only and only the force-placed insurance premium billed to you.
If the house is showing expirations in the for the 4-point inspection ( in most cases roof and electrical wiring ,very substantial to repair 30000 and 45000)
your house is no longer insurable for the amount that the bank would wish for. Risk and value = zero,premium zero.But the bank (they have built crossed-crossed networks among themselves and "independent on the open market" insurers.)
By origination you had your premium, when inspections are due
(they are free) you have to refuse them,in Florida , you hold the title and none else can trespasswarn lienholders,thief's,arsenists and/or fraudsters. So they terminate insurance ,you are an unknown risk.Retroactive billing you must deny ,thats a trick ,they want you to for sleep a 6 month period (mutual acceptance etc) and confuse you when the attack comes , the hike in your monthly payment.
If terms require you to allow inspections , you allow ,and work with the Lawyers for a fine way out in equity loans.Equity will come along with the work order.
get a QWR (qualified written request) to your lender /servicer about retroactive billing ,identify the sum and request them to put the Money back were they pulled it from,as a result your
principle will show lower for a few thousands over night. Products must be bought in knowledge of the purchaser and
in case of acting under POA ,the bank must establish live contact with you then , not 1 to 8 years later (the more collateral they can secure on you, the longer they wait with their ugly attack) .Once the foreclose ,they do same procedure with the next guy/gal and collect a new downpayment again. Do the math,30 yrs no downpayment on the table , against let's say 5 or 6 or 7 collected and forfeited! yours is forfeited they claim if you fight for it(which is now in California the newest hit and may throw major banks of balance
if this is going to happen). Once this is accomplished it is relatively easy , you have proof , of how much they were lending you ,behind your back, you can get them to lend you
the same amount again,subsequently to bring the 4-point inspection to pass.And market standard insurance becomes available again.Anyway develop your strategy ,you can also just refer to consumer law with the 10% price hike and say the product you have purchased here is insufficiently in your interest and your participation is only 1.1 times as it was before,when you had insurance,pass the headache of remodeling or the headache of getting a smaller sum insured , to them,not to you. One case in California ,a homeowner got a nice sum compensation for pain/suffering psychologically seeing his Downpayment forfeited and house gone.I (hotmail)did not see the case yet ,but i sure hope the sum was covering the necessary cash to start were he was when he defaulted., with a different nicer house.See also CNN super moon comments


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