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Forced Place Insurance and Kickbacks From The Market Ticker

11 Nov

This is not news to us, certainly foreced place insurance is something that we have been bringing up for over two years – we’ve seen it abused against all kinds of homeowners – from all the different lenders – thousands of dollars in inflated insurance fees; and even using those fees as a way to force borrowers into foreclosure…

Nice to see it getting some more attention. Thanks Karl.

From The Big Picture (and other places…)

From The Big Picture (and other places…)

Consider one case found by Horwitz. A homeowner’s $4,000 insurance policy, was paid by the loan servicer, Everbank via escrow. But Everbank purposely let that insurance policy lapse, and then replaced it with a different policy –  one that cost more than $33,000. To add insult to injury, the insurer, a subsidiary of Assurant, paid Everbank a $7,100 kickback for giving it such a lucrative policy — and, writes Horwitz, “left the door open to further compensation” down the road.

What’s this about?

Grab your mortgage.  There’s a clause in there that says you’re obligated to maintain hazard insurance (fire, etc.)  This is for the protection of the bank.  If you don’t, they’re entitled to “Force Place” coverage on your house.

This is more expensive, of course, because among other things if you’re not paying you might have an “accident” – friction between the payment coupon and checkbook has been known to start many fires.

But the really outrageous nature of this isn’t the forced-placement at ridiculous premiums (they should be ridiculous) – it’s the fact that the servicers are receiving kickbacks on the policies!

Now perhaps I’m a bit dense here, but the servicer is a fiduciary to the investors.  So how is it legal and proper for them to receive a kickback on a service they contract for the benefit of protection of the investor’s interests?

The scams just never end, do they?

 

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