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Feds Hoping to Recover Hundreds of Millions in Forced Place Insurance Overpayments

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Washington, DCThe Federal Housing Finance Agency (FHFA) is considering a Force-placed insurance lawsuit against major banks and lenders alleged to have participated in kickback schemes since the housing bust of 2008, in an effort to recover what has been described as hundreds of millions of dollars in losses.

There is little doubt that insurance is vital, especially in southern states such as Florida when hurricane season comes calling. It also behooves a mortgage holder to ensure that adequate insurance is in place - and in good standing - in order to protect the investment the bank or other mortgage holder has in the property. Regardless of who holds the mortgage, it is the homeowner’s responsibility to ensure that adequate insurance is in force for the property.

If it isn’t - or has been allowed to lapse - then the mortgage holder has every right to place lenders insurance on the property.

Lender insurance itself isn’t the problem. The issue has to do with higher rates for inferior policies that often carry less coverage than traditional insurance, at allegedly inflated costs. Those costs are high, claim various pundits and industry watchers, because of alleged kick-back schemes facilitated between major banks and Force-Place Insurance providers.

According to blogger Phil Huff, CEO of Platinum Data Solutions, the FHFA barred the ability for banks and other lenders to collect commissions from insurers when Forced-Place Insurance policies are issued. That happened this past June. Additionally, the Office of the Inspector General (OIG) for the FHFA is considering Forced-Placed Insurance Lawsuits in an effort to retrieve overpayments for lenders insurance products.

It was reported that in 2012 Fannie Mae and Freddie Mac, as well as other Government Sponsored Enterprises (GSEs), paid out nearly $360 million in Force-Place Insurance premiums.

If they have overpaid, which is the suspicion, then the FHFA wants that money back.

Offices of the Attorneys General in various states have been cracking down in the last few years over the excessive premium costs generally associated with lenders insurance, and the alleged kickback schemes that ensue. To that end, there have been a plethora of Forced-Placed Insurance Lawsuits.

According to Huff, writing in Mortgage Servicing News (10/14), state regulators in New York, Florida and California accused two lender insurance companies in 2012 and 2013 of charging rates that were deemed to be excessive, and began the process of entering into consent orders to settle claims.

The excessive rates are costing homeowners and GSEs needlessly, and since 2008 when the housing bubble burst, inflated lender insurance rates have become a significant problem and a looming presence: over the past six years Force-Place Insurance has ballooned to $1 billion dollars a year.

The OIG for the FHFA recommends the possibility of forced-place insurance lawsuits in an effort to “remedy potential damages caused by past abuses in the LPI market and, then, take appropriate action in this regard.”

READ ABOUT FORCE-PLACE INSURANCE LAWSUITS

Force-Place Insurance Legal Help

If you or a loved one have suffered losses in this case, please click the link below and your complaint will be sent to an insurance lawyer who may evaluate your Force-Place Insurance claim at no cost or obligation.

READER COMMENTS

Posted by

on
I bought a New House way back October of 2005. The Realtor from Pardee Homes, the owner of Home Builders did not mention that there was Melrose tax. I just found out the Melrose when my house was foreclose on March 2010.
The Wells fargo Bank approved my modification and give me a 4 months trial period. My attorney told me that I have to pay the trial period on time and my house will not be foreclosed. 15 days prior to due date, the payment has been sent to them. But to my surprised on my fourth payment did not accept my payment and a few days after I received a letter posted on my door indicated that my house has been foreclosed.
I spoke with my Wells Fargo Rep and also to my Attorney, but both of them told that my house has been foreclosed. I have no idea what to do, but to accept it.

Posted by

on
FHA case, 4-years in foreclosure (all the way to Supreme Ct in WI) and 1-yr after circuit court ruling ... SunTrust (servicer) still buying/claiming FHA insurance and damaging my credit as bill climbs despite circuit court finding of no payments owed ... they are scamming the US Govt, this is a Qui Tam or MBRS suit and I need help to get my home back. It all started with their lies 4-2009 of modifying my FHA loan to 2% rate and 31% gross income, then lost, then no docs to sign, then into court ... cost me more than the modification would have saved my home & they forged docs and I have proof of all this... Call me. Thank You, Todd Schmidt. SunTrust is not Holder In Due Course, no transfer or sale of mortgage recorded, forgery of my signatures on note/mtg placed in local registry of deeds. I've the wire transfer and check numbers from the "closing". Deed was in my name since 6-3-2008 and this occurred on 9-22-2008....

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