Ocwen Loan Servicing, LLC, Assurant, Inc., Standard Guaranty Insurance Company and American Security Insurance Company have been named as defendants in a class action filed in the Southern District of Florida alleging that the forced place insurance sold by them is overpriced and illegal. The Plaintiff alleges that Assurant and QBE control nearly the entire market for forced placed insurance policies and, to keep that control, they pay lenders “kickbacks” based on the premiums in forced place policies. It is alleged that insurers are also charging borrowers for insurance coverage that is backdated to periods when no claims were made or for coverage that is not needed.
Forced place insurance premiums have quadrupled between 2004 and 2011, from $1,485,000,000 in 2004 to $5,692,000,000 in 2011. Assurant and QBE/Balboa control 99.7% of this market.
On March 21, 2013, the New York Department of Financial Services’ (“NYDFS”), investigation into force-placed insurance practices “produced a major settlement with the country’s largest ‘force-placed’ insurer, Assurant, Inc. . . . [The settlement] includes restitution for homeowners who were harmed, a $14 million penalty paid to the State of New York, and industry-leading reforms that will save homeowners, taxpayers, and investors millions of dollars going forward through lower rates.” Further, under the Consent Order entered, Assurant and its subsidiaries (including ASIC and SGIC), are prohibited from paying commissions to any servicers or entity affiliated with a servicer on force-placed insurance policies obtained by the servicer. See Assurant & NYDFS Consent Order, Mar. 21, 2013, at 9.
While most mortgages give the lender the right to force place insurance to protect its security interest in the property, lenders do not have the right to profit from force placing insurance. It is alleged that Ocwen and other lenders have exclusive arrangements with Assurant that result in artificially inflated prices that are passed on to the borrower. Ocwen is paid a commission on these artificially inflated prices but does nothing to earn a commission or income. This gives Ocwen an incentive to force place higher cost insurance on the consumer’s home.
Kickbacks to mortgage servicers from insurance companies that are making money off force placed insurance increases cost to homeowners and those least able to afford it. If you have insurance force placed on your mortgage, you should immediately obtain coverage from another insurer. This will always save you money. If you have been paying for insurance force placed by your mortgage company, you should seek legal representation. While you are responsible for the reasonable costs associated with insurance protection for your home, you are not responsible for the excess fees and to cover kickbacks paid to the mortgage company by the insurer. Our firm is working with other firms across the country to evaluate these claims and help people who have been affected by this illegal activity.