Few would argue as to the need for insurance on such a large investment as a home. For the homeowner, the insurance serves to protect equity. For the mortgage-holder, insurance is a hedge against damage to or loss of the property against which the mortgage is held. While insurance is usually the responsibility of the homeowner, having adequate insurance in place is conditional to having a mortgage.
When a mortgagee allows home insurance to lapse for reasons of financial hardship or mismanagement, the mortgage holder has the legal authority to place lenders insurance against the mortgaged property.
The problem that critics of force-placed insurance often cite are inflated rates that wind up costing the homeowner substantially more than traditional insurance products. This is especially grievous to the homeowner having allowed a traditional policy to lapse for reasons of income or financial hardship, only to be hit with coverage much more expensive - and in some cases at predatory rates - forcing a homeowner into certain foreclosure and fostering Forced-Placed Insurance Lawsuits.
According to a release by the Office of Insurance Regulation in Tallahassee, the American Security Insurance Company (American Security) submitted a rate filing on March 1 that proposed an overall average increase of zero percent across the state for its Force-Place Insurance starting in 2014.
Following a hearing in May, the regulator rejected the rate filing, presumably on grounds that in its view existing rates were too high to begin with. To that end, the regulator requires American Security to reduce its lender insurance rates by 10 percent, together with a mandate for annual rate filings.
There are other stipulations, according to the release. Among them, American Security is required to notify borrowers of alternatives for lender insurance, by mail, within 120 days of the execution of a Consent Order between American Security and the Regulator. The Consent Order also prohibits the payment of commissions to a mortgage servicer on Lender insurance policies obtained by that servicer.
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Given the climate afforded to retirees in the Sunshine State, there remains a high proportion of elderly residents in Florida, many of whom continue to hold mortgages due to the economic collapse of 2008 and other factors. With limited income, force-placed insurance terms considered predatory by some create additional hardship for retirees, together with the wider population not immune to economic forces beyond their control.
The Consent Order agreed to with American Security is an effort by the Regulator in the state of Florida to extend some measure of control and relief for affected homeowners. Those for whom a rate reduction is not enough, might well consider a call to a Forced-Place Insurance lawyer as a prudent option.