Force-Placed Insurance

Mortgage servicers, banks, and their accountants must sign off under federal regulations that the loans that they package and are underwritten by Fannie Mae comply with certain requirements, including those involving insurance. If the mortgage does not have the proper insurance, it cannot be part of the Fannie Mae backed system. The Florida Senate passed insurance legislation which clearly jeopardizes the chances of home ownership by Floridians with a Fannie Mae mortgage because it is non-compliant. Worse is that when many Floridians buy that type of non-compliant insurance, they may have the additional burden and expense of the mortgage servicer adding force-placed coverage.
Continue Reading Florida Senate Passes Insurance Bill That Will Make Mortgages Non-Negotiable Under Federal Regulations

Embedded in almost any residential mortgage or deed of trust, mortgage lenders include a requirement that homeowners maintain an insurance policy covering the improvements erected on the property, such as the house, garage, shed, or pool. Where a homeowner’s policy of insurance lapses, most insurance policies will allow your mortgage lender to obtain “lender-placed” or “forced-placed insurance.”
Continue Reading Who Does Lender-Placed Insurance Protect After a Covered Loss Under?

Some homeowners may have lender-placed insurance policies, also known as “creditor-placed” or “forced-placed policies.” These policies occur when there is an insurance policy placed by a bank or mortgage company on a home when the homeowners’ insurance policy may have lapsed or is deemed insufficient by the bank. Under these lender-placed insurance policies, the bank or mortgage company is the named policyholder and insured. This poses a problem when a loss occurs on the property and the homeowner reports a claim to his or her insurance company.
Continue Reading I have a Lender-Placed Insurance Policy; What Happens to My Homeowners’ Insurance Claim?

I recently blogged about the issues regarding forced-placed insurance policies, how you can prevent them, and why insurance companies benefit from these types of policies. On August 6, 2015, U.S. District Judge Kenneth Marra denied a motion by Deutsche National Bank Trust and the American Home Mortgage Investment Trust (AHMSI) ruling that homeowners could pursue claims under the Florida Deceptive and Unfair Trade Practices Act (FDUTPA) and the Florida Consumer Collection Practices Act, as well as breach of mortgage agreement, breach of implied covenant of good faith and fair dealing, and unjust enrichment of loan servicer. The case, Martorella v. Deutsche Bank National Trust Company,1 is currently under appeal from the Southern District of Florida.

Continue Reading Force-Placed Insurance Class Action Survives Motion to Dismiss

When a borrower fails to obtain or maintain proper hazard, flood, or wind/hail insurance on property that secures a loan, the lender remains authorized to “force place insurance” on the property in order to protect the lender’s interest in the property. Sounds reasonable… right? On its face, it makes sense that lending institutions should have the right to make sure property securing a loan maintain adequate insurance in the event of a natural disaster or other hazard that property owners encounter.

Like so many issues with both high finance and insurance carriers, though, one can’t necessarily take force placed insurance at face value. In this initial installment of the Force Placed Insurance Series, I’ll take a closer look at issues surrounding force placed insurance.


Continue Reading Are Lenders Properly Protecting Themselves and Property Owners When Property Insurance Lapses? – Force Placed Insurance Series

Recently, JPMorgan sought court approval to the terms of a settlement with parties in three class action cases. The cases were consolidated and alleged that JPMorgan force-placed exorbitantly priced flood insurance policies on homeowners whose mortgages were serviced by it.


Continue Reading JPMorgan Proposed Class Action Settlement Of $22 Million Over Force-Placed Flood Insurance

I was recently asked if a homeowner could rely upon their mortgage lender’s statement that the lender would purchase a “force place” flood insurance policy if the homeowner did not do so themselves. These homeowners could not secure a flood insurance policy on their own and never heard from the bank. Naturally, they assumed the bank purchased the policy and they were covered. Months later Hurricane Sandy flooded the home and the homeowners learned that bank had not purchased the insurance and the home was not covered for the loss.


Continue Reading Mortgage Lenders Must Purchase Flood Insurance for Borrowers

Banks and mortgage companies regularly buy what is known in the insurance world as “force-placed” insurance coverage. This type of coverage protects a mortgagee’s interest in the property should no other insurance coverage apply. In other words, force-placed insurance ensures that a property is covered, regardless of the circumstances. Most force-placed policies are made between the bank/mortgage company and the insurer. So what rights, if any, does a borrower have under such a policy?


Continue Reading Third Party Beneficiary Status Under a Force-Placed in Texas