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The Consumer Financial Protection Bureau will propose mortgage servicing rules this year that would restrict force-placed insurance and impose new disclosure requirements for adjustable-rate mortgages.
March 6 -
Fannie Mae intends to acquire coverage for uninsured borrowers through a carrier of its choosing, it announced on Tuesday. The move would "significantly reduce costs to homeowners, taxpayers, and Fannie Mae," the GSE says, but harm a profitable business for mortgage servicers.
March 6 -
A federal judge has granted approval for a Florida force-placed insurance class action to proceed against Wells Fargo and QBE Insurance. Evidence already uncovered in the case poses added peril to the defendants and other banks.
February 22 -
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 -
Borrower advocates say that the banks' use of unregulated carriers exposes homeowners and mortgage investors to higher costs and greater risk in the event of a catastrophe.
April 11 -
The proposed attorneys generals' settlement of mortgage servicing practices threatens a high-margin business that brings in hundreds of millions of dollars every year for servicers.
March 10
California is taking aim at the prices banks and insurers charge for force-placed home insurance, the state announced on Wednesday.
California Insurance Commissioner Dave Jones said that news reports of potential abuses in the force-placed market prompted him to launch a review how banks acquire insurance coverage on the homes of mortgage borrowers who allow their insurance to lapse.
The commissioner's staff concluded that force-placed insurers paid out only a small portion of the premiums they collected in claims. This "points to excessive premiums," Jones said in a statement.
"I sent our findings to the top 10 forced-placed insurers and directed that they submit new rate filings with lower rates," he continued. The high price of the coverage is "yet another facet of lender practices associated with the mortgage crisis," he said.
Historically an overlooked niche in the mortgage servicing industry, force-placed insurance has become both prevalent and controversial because of the unprecedented stress homeowners have faced in the wake of the home-price collapse. Banks purchase force-placed policies when borrowers fail to live up to their obligation to maintain insurance on their properties. Homeowners must then pay back the servicer for premiums advanced to the insurer.
American Banker
The furor over force-placed insurance is getting out of hand, suggested Kevin McKechnie, head of the American Bankers Association's insurance association.
"It's worth reminding Americans that force-placed insurance arises as an issue only when borrowers are unable to fulfill their obligations to maintain continuous hazard coverage on their collateral," he said.
The commissioner's announcement was not a surprise, a spokeswoman for Assurant Inc., one of the largest insurers in the force-placed market, told American Banker.
"We… have already been in discussions with the state of California in regard to rates," a spokeswoman for Assurant Inc. said. "As a regulated insurance provider in 50 states, we routinely work with regulatory authorities, and we look forward to continued discussions."
QBE, the other major vendor of force-placed policies, did not immediately respond to a request for comment.
California's announcement is only the most recent of a growing list of force-placed reviews.
New York State's newly created Department of Financial Services, a combined banking and insurance regulator,
Last week,
The ABA insurance association's McKechnie argued that the public discussion of force-placed insurance has become excessively confrontational.
"Force-placement didn't cause the housing crisis," he said. "This product and its role in mortgage financing are absolutely critical components if the liquidity of mortgage markets is to be preserved."
