Lenders insurance is a product brought into play when homeowners fail to provide insurance on real property to which a mortgage is registered. On other occasions a policy is allowed to lapse or in the mortgage holder’s view, there is insufficient insurance to cover the asset in the event of a catastrophic loss. In such a situation, a mortgage holder has the authority to force-place insurance coverage in order to protect the mortgaged asset.
The problem, as many homeowners and plaintiffs in Force-Placed Insurance lawsuits can attest, is that lender insurance is often more expensive, with less coverage than standard policies. In many cases, premiums have been found to be wildly inflated.
According to court documents, the defendants admitted that rates for lenders insurance would be higher than those of more traditional policies - but failed to tell homeowners those premiums would not only be up to ten times more expensive, but that the bank would profit from those admittedly inflated premiums.
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The forced-placed insurance class-action settlement, approved through a 70-page decision penned by US Magistrate Judge Jonathon Goodman just days ago, provides compensation to some 400,000 class members who will share in the $140 million settlement. Goodman, in his decision, noted the fairness of the settlement.
“Unlike some consumer class settlements, this is not a low-dollar value or ‘coupon’ settlement,” he wrote. “In many instances, perhaps most, the claim settlement relief will be worth hundreds of dollars to the average Claimant.”
The Force-placed insurance lawsuit is Lee v. Ocwen Loan Servicing LLC et al., Case No. 0:14-cv-60649, in the US District Court for the Southern District of Florida.