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Law enforcement officials have issued subpoenas to the following companies as part of an investigation into the sale of force-placed insurance. Consumers who have outstanding loans for homes and other property are often required to buy force-placed coverage after allowing their own policies to lapse. Government officials suspect vendors may have gouged consumers in the sale of force-placed policies. Their main focus is mortgages, but investigators are also looking into auto and other types of force-placed loan coverage, according to a source familiar with the investigation.
January 27 -
A New York probe has brought national attention to banks' alleged self-dealing in the sale of force-placed insurance. But the investigation is just one of many looming challenges to the practice.
January 18 -
Evidence of abuses and self-dealing in force-placed insurance suggests there may be far larger problems in how servicers are handling home loans than sloppy document recording.
November 9
The financial industry's troubles with a controversial type of insurance coverage appear to be spreading to new areas. In recent weeks New York State's Department of Financial Services has issued subpoenas to
The state officials are seeking information about force-place property insurance that banks purchase on behalf of uninsured borrowers. Force-placed insurance is a type of coverage that protects creditors in the event an uninsured borrower's property is damaged.
It's big business. One large insurer, Assurant Inc. receives around $2 billion in annual premiums, and banks are paid commissions on the policies.
The New York Times and other media outlets have previously
However, the full list of companies that have been sent subpoenas, unreleased until now, indicates that the state investigation is broader than simply force-placed insurance on homes. The list includes a number of bank subsidiaries that also handle force-placed auto insurance and REO insurance, a costly form of coverage placed on foreclosed homes and billed to mortgage bond investors.
New York's DFS declined comment.
A person familiar with the investigation said that force-placed auto insurance and post-foreclosure insurance are among the subjects of the probe.
Force-placed insurance, by itself, is not controversial; because investors are at risk if property is damaged, borrowers are required to maintain insurance coverage. If they fail to do so, the servicer handling the loan customarily buys coverage for them.
Consumer advocates and mortgage bond investors allege banks have corrupted the process by demanding that insurers share their premium revenues — an arrangement critics claim is a form of pay-for-play. Force-placed insurance can be 10 times more expensive than voluntarily purchased policies,
"This is clearly not in the investors' interest," Amherst Securities analyst Laurie Goodman
New York's DFS has sent subpoenas to at least four separate subsidiaries of Wells Fargo and three divisions of JPMorgan Chase & Co. The variety of entities being subpoenaed suggests New York is looking at whether deals among insurers, banks and banks' affiliated insurance agencies were truly conducted at arm's length. Chase declined to comment. Wells said it is cooperating with DFS.
Many entities the DFS is looking at already face related class actions over force-placed insurance. At JPMorgan Chase & Co., employees stated in a class action deposition that a bank insurance subsidiary, Chase Insurance Agency Inc., collected tens of millions of dollars in commissions from flood insurance — yet the agency did not employ a single insurance agent. The bank
"What function does Chase Insurance Agency, Inc. perform with respect to flood insurance?" a plaintiffs' attorney asked a Chase employee during a deposition.
"I would say no function," Chase's employee responded.
For a full list of the entities to which New York State's DFS has sent subpoenas, click
