Homeowners, government agencies and even attorneys are paying closer attention to financial institutions these days as more and more are being accused of receiving illegal kickbacks for force-placing insurance for their clients. While it is required for homeowners to have insurance coverage, and it is legal for lenders to force-place insurance if their coverage lapses or is canceled, the way some lenders have gone about it has been called into question. In many instances, class action lawsuits have been filed.
- Banks were placing their clients with insurance carriers who were offering incentives and commissions to the lenders for choosing them as their carrier.
- The premiums that these insurance carriers were charging were significantly higher than other carriers, even though the coverage that was force-placed provided less protection.
- The commissions being offered to the lenders were being charged back to the homeowners, so not only were the savings not being passed onto them, but their premiums were raised to cover the cost of the kickbacks.
- On many occasions, homeowners were going into foreclosure because they couldn’t afford the cost of the force-placed insurance.
While the most recent issues have been seen on mortgage loans, the auto industry has had its fair share of issues with force-placed insurance as well. In 2017, Wells Fargo agreed to pay $80 million in remediation when several customers were issued force-placed coverage even though they already had their own insurance. As a result, customers overpaid for unneeded insurance, they became delinquent on their loans causing their credit scores to be affected, and over 20,000 vehicles were wrongfully repossessed as well.
Lenders’ Risk offers a variety of products that help alleviate the stress of tracking your customers’ coverage or of needing to force-place insurance altogether.
- Mortgage Impairment Insurance – This coverage allows you the freedom to put your resources to use in other more needed areas of your business by reducing the tracking required on your borrowers’ loans to only during the time the loan is closing. Coverage is provided for uninsured loss or damage to the mortgaged property even if the lender takes no action in response to known lapses or cancellations of borrower insurance. There are 3 options for coverage under this plan to meet your specific needs.
- Property Blanket Insurance – An alternative to Mortgage Impairment Insurance, Property Blanket Insurance provides blanket property coverage only for real estate securing the lender’s mortgage loans, so the lender does not have to track borrower coverage.
- Equity Protection Program – This program is a fully insured lending program with several benefits, including protection against borrower default, elimination of potential foreclosures, and one rate for all insured loan types.
At Lenders’ Risk, we provide you and your clients with peace of mind that you are protected in a reputable, trustworthy and transparent way, while offering you cost-efficient and resource-reducing solutions to meet your insurance needs. You can find more information on the above programs as well as other products offered at Lenders’ Risk here or by calling 888-600-4436 to speak with one of our highly experienced and knowledgeable agents.