Has your bank notified you they will be charging you for home insurance? Watch out. Oftentimes the charge is three or four times — or even more — more expensive than the home insurance you already have. If you are like me, you already provided proof that your home is insured. In fact, you may have sent the proof multiple times. Nevertheless, you are unable to convince the bank the home is covered. As a “service” to you they keep insisting they will buy their overpriced insurance for you and bill you for the cost.
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Lawsuits Necessary Due to a Lack of Common Sense and Business Ethics
According to the Associated Press, during the three-year period from 2011 to 2013, mortgage servicers and their home insurance company partners paid $674 million dollars to settle lawsuits with consumers. The result of these settlements is that not a single one of these home insurance lawsuits has gone to court. Banks involved include: Wells Fargo, JPMorgan, Citigroup and Bank of America. Insurers involved include: QBE and Assurant.
Even though the cases never made it to court, collusion and kickbacks were exposed through investigations by New York’s Department of Financial Services and several private lawsuits. The NY Department found that large banks and insurers colluded to inflate the price of a type of home insurance known as “forced-placed” coverage. The banks and insurers then split the profits through a scheme where insurers paid banks for referring business.
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Despite Lawsuits, Consumers Hurt
Unfortunately, some people likely lost their homes because they couldn’t afford the forced-placed insurance their bank foisted on them. Fortunately, the result of the lawsuits is that this problem should be largely behind consumers. However, there may still be major problems ahead for the banks and insurers involved. The Associated Press is now reporting that the Federal Housing Finance Agency (FHFA), which is responsible for guarding Fannie and Freddie’s finances, is also considering a lawsuit. Reportedly the FHFA told its inspector general’s office that it will consider filing the lawsuits and will make a formal decision over the next year.
The AP further stated that Fannie Mae and Freddie Mac, which have been under the FHFA’s conservatorship since 2008, lost an estimated $168 million from the fees in 2012 alone, according to the report by the FHFA’s inspector general. The FHFA didn’t accept the inspector general’s estimate of damages, but the agency’s official response to the report said it “does not object” to the recommendation that it consider suing.
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