-
The Federal Housing Finance Agency is considering reforms to force-placed insurance aimed at giving the public a better deal. So why isn't it letting the public in on its planning?
June 10
Update: the full list of FHFA comments are now posted on the agency's web site. They can be
The Federal Housing Finance Agency announced in March it was giving the public two months to submit comments related to a proposed ban on commissions and reinsurance agreements in force-placed insurance. That period for submitting comments ended May 29. Most federal agencies post comment letters as they're received, or a few days after the acceptance period ends.
The FHFA, however, has not yet posted any force-placed insurance comments. It also declined to provide the public's input directly.
American Banker instead has collected some of the letters submitted to the FHFA directly from the authors. The five included here are believed to be only a portion of those submitted. American Banker will add new public comment letters as they become available until the FHFA releases them in their entirety.
Center for Economic Justice (and allied groups)
Policy Position: Supports a ban on force-placed insurers paying commissions to banks for referring business. Also supports resurrecting a Fannie Mae plan to cut mortgage servicers out of the force-placed purchasing process and buying coverage directly from underwriters at a steep discount. Says that banning payments alone may not lower prices, and calls for prompt action given the size of the multi-billion dollar market.
"By allowing Fannie Mae to implement the direct purchase program, FHFA will immediately reduce LPI charges to borrowers and investors and introduce beneficial competition into the LPI market." (Full comment )
American Bankers Association
Policy Position: Defends force-placed insurance costs and financial ties between insurers and mortgage servicers. Suggests delaying force-placed insurance reforms indefinitely. Says net force-placed insurance costs will fall when the foreclosure backlog clears.
"We strongly encourage the FHFA to defer any further action to alter servicing compensation, including the role of LPI, until it can be addressed as part of a holistic reconsideration of the entire mortgage finance system." (Full comment )
New York State Department of Financial Services
Policy Position: Recommends an immediate federal ban on commissions and servicer reinsurance akin to one it already imposed, declaring that a "kickback culture" harms consumers and the government sponsored enterprises.
Insurers have created incentives for banks and mortgage servicers to buy force-placed insurance with high premiums by enabling banks and mortgage servicers, through complex arrangements, to share in the profits associated with the higher prices .those costs are ultimately borne by taxpayers." (Full comment )
Florida Office of Insurance Regulation
Policy Position: Says that the FHFA should limit itself to determining the price and circumstances under which Fannie and Freddie will pay for force-placed insurance. Says that commissions and reinsurance are not inherently inappropriate, though it is eyeing additional actions over alleged sweetheart reinsurance deals and unjustified commissions.
"A better way to proceed may be for the FHFA and the Enterprises to limit the costs that are compensable rather than specifically prohibiting the payment of commissions state regulators are skeptical of [the legitimacy of servicer-affiliated reinsurance] based on recent testimony in the New York and Florida hearings." (Full comment )
Consumer Mortgage Coalition
Policy Position: Says controversial payments to banks may already have stopped; argues that commissions are justifiable.
"We suspect that FHFA may be using an analysis that looks back in time, and that includes practices that no longer exist . Servicers incur costs in providing this service, and should be compensated for these costs." (Full comment )
ASIC (division of force-placed insurer Assurant)
Policy Position: Says that regulation should be left to state regulators. Defends appropriateness of payments to servicers. Says servicer-affiliated reinsurers receive no special treatment.
"ASIC supports the existing structure of the LPI industry the issuance of LPI and the tracking of insurance should not be separated. This has had the effect of keeping premium rates lower over time [T]ransactions between a state-licensed and regulated insurance carrier and either a state licensed and regulated insurance agent or reinsurer should be noted to be outside of "remuneration received, directly or indirectly, by Servicers." (Full comment )
