Big Banks Face Inquiry Over Home Insurance

[alp227]

A New York State financial services agency is investigating several large banks to see whether they fraudulently steered homeowners into overpriced insurance policies.

The investigation centers on so-called force-placed insurance that has become increasingly common since the downturn of the housing market began and homeowners had trouble keeping up with payments on their home insurance.

JPMorgan Chase, Bank of America, Citigroup and Wells Fargo are among the major companies involved in the inquiry by the office of Benjamin M. Lawsky, the superintendent of New York State’s Department of Financial Services, according to a person briefed on the investigation who asked to remain unidentified because the matter was private.

Mr. Lawsky’s office issued 31 subpoenas or other legal notices related to the case in early October, just as the state’s insurance and banking departments were merged under his new agency. His office has already turned up instances where mortgage servicing units at large banks steered distressed homeowners into insurance policies up to 10 times as costly as the homeowners’ original plans.

full: http://www.nytimes.com/2012/01/11/business/big-banks-facing-inquiry-over-possible-insurance-fraud.html

[KT2000]

1. Is there no end to their greed?

Their employees are being promoted and given bonuses for coming up with crap like this.

[just1voice]

11. Yes, it's called regulation and enforcement.

It used to happen here but now only protesters get arrested.

[SomeGuyInEagan]

12. Ding! Ding! Ding! Winner, winner ...

... chicken dinner.

Just sayin'.

[sarcasmo]

2. No if about it

of coursed they screwed homeowners out of money, it's what they do.

[SharonAnn]

3. That's what GMAC and other auto financers do, too.

We found that out when our niece stopped paying on an auto loan that we had cosigned on.

So, we took the car from her, sold it, and paid off the loan.

We had an interesting meeting with GMAC when their collectors went after us for not responding to their letters and demands. We found out that she had contacted them and changed our address and phone number to hers so we didn't know about it until their "heavy" contacted my husband at work.

I had to get involved because he was so angry that he couldn't see straight.

They were right to want payment, but I insisted that we go through the paperwork to find out why we had not been notified when the loan went into default. When we found that they had accepted a change from her instead of us, they suddenly became like docile little puppies. From angry pit bulls to docile puppies. It was an interesting transformation.

But, in the meantime, they had put an exorbitantly priced insurance policy on the car. I demanded that they remove those charges since we would've insured the car if they'd contacted us, as they should have.

[ms.smiler]

4. Forced placed insurance is exactly what the banksters did to my son.

Thankfully, I had been researching mortgage and foreclosure fraud and had already explained to him the many tricks that mortgage servicing companies use to try and manufacture a supposed default.

He came in one day and explained that $800 was added to his monthly mortgage payment. Like me, he has plenty of equity in his home and I realized the banksters were after his property. I gave him the name of my attorney and she is representing him. His servicer has already violated federal law twice and neglected to answer a Qualified Written Request.

I can’t help but think that homeowners making mortgage payments are simply the folks that haven’t yet been foreclosed by the banksters.


I filed suit against my mortgage servicer and the trial is presently scheduled for May of 2012. My son is contemplating filing the same suit.

[Snake Alchemist]

5. Force placed insurance happens when a mortgage servicer doesn't receive proof of insurance

Last time it happened to me, my insurance company had sent the proof of insurance to the wrong address. It is fully refundable once proof is received. I think it took me about 48 hours to clear up. If there is a lapse in insurance you do have to pay for the amount of time that it lapsed.

[ms.smiler]

6. Snake Alchemist, the mortgage lender or servicer has a right to protect its collateral if

they determine the property is underinsured. My son’s servicer, Citi, determined that for whatever reason, the property was not adequately insured. The servicer is under no legal obligation to place the most reasonably priced insurance and so they did not. Instead, lender/servicer placed insurance is the most expensive that the servicer can find. The homeowner is then obligated to pay for the insurance with NO right to cancel that insurance.

The insurance only covers the property and not the contents of the home. So my son has his own homeowners insurance and the servicer now has theirs which my son is expected to pay.

Since I began my research, I check our property records online every day. A few months later I discovered that Citi had filed a fraudulent Assignment of Mortgage on my son’s property. To me, that was confirmation that they intended to steal his home.

Snake Alchemist, it sounds as though you are in a fortunate position. The banksters must not yet be prepared to steal your property.

[Snake Alchemist]

7. Call up your insurer and ask what the rates are for sight-unseen policies.

That is inaccurate. Force-placed insurance and are refunded the insurance as soon as you supply proof of insurance. I have first hand experience.

[ms.smiler]

8. Snake Alchemist, I understand that you are trying to be helpful, thank you.

I would have thought that proof of insurance would have been enough. We are all capable of being reasonable, and it would be grand if Citi was interested in being reasonable as well.

The insurance problem was just the beginning. Then there was the misapplication of my son’s escrow money. Plus like so many other homeowners, his mortgage contains fraud and now his Title has been slandered. All this happened because Citi wanted to manufacture a supposed default the entire time my son was dutifully making his mortgage payments.

Consider my son’s position. He makes his full mortgage payment and the servicer misapplies the monies. How can he force them to correctly handle escrow? Citi wants to create some type of supposed default so they have an excuse to foreclose. Now my son realizes that if he makes his payments Citi still has an excuse to foreclose, the same as if he doesn’t make his payments.

I’m a business person and I can do business with just about anyone. It simply isn’t possible though to do business with scammers, so we’ll sue. Given the fraud in his mortgage and the damage done to his Title, someone already owes him more money than he MIGHT still owe on the mortgage.

[Snake Alchemist]

9. That does not address the issue though.

Call up your insurer and ask for a quote for a house that you have no access to the interior. Just tell him sq ft and acreage and see what he comes up with.

Have your son call his insurance agent and tell him to send proof of insurance to the mortgagee clause. Have your son do the same. The issue should be cleared up quickly. If it lapsed at all though, he will have to pay for the lapsed time period.

Best way to avoid escrow is to put down 20% or more on the house.

[Yo_Mama]

10. Why didn't your son get his own property insurance?

If you just send them proof of insurance, they have to refund the money.

Force-placement insurance carries much higher losses, so it's never anything you want to buy. A regular insurance policy is always going to be cheaper - this isn't necessarily a servicer scheme, it's a reality derived from insurance fundamentals.

Property insurance covering contents doesn't insure the creditor for loss. If the property has more value than covered in your son's policy, then adding to his policy is going to be much cheaper, but the mortgage company will have to be listed as the beneficiary - the requirements should be in the loan docs.

Are you sure you are not confusing your son's personal policy with the required property insurance indemnifying the creditor? This should be easily cleared up with a call to the mortgage servicer and a call to an insurance agent. Failing to make those contacts and provide alternate insurance is not grounds to sue the servicer.

[ms.smiler]

13. Yo Mama, I very well understand there is how things are supposed to work, and then there is the way

that Citi has done them. My son had, at all times, his homeowners insurance which covered the home and contents and there was never a lapse in coverage. That insurance was paid separately though apart from his mortgage payment ever since he purchased his home.

I suspect, that gave Citi a window of opportunity to falsely claim the property was not insured and they force placed insurance, which is certainly much more expensive.

As I understand, when Citi was presented with proof of insurance, they stated the property was underinsured and their insurance would remain. My suspicions only grew. My son’s mortgage has no clause that enables him to cancel that insurance in favor of his own. Simply, he proved he had insurance, they said it wasn’t enough and they weren’t about to drop that expensive insurance from his mortgage payment.

Do you understand now why I gave my son my attorney’s phone number?

This all fits though with what I had been researching. This at least wasn’t a stealth approach to manufacturing a supposed default. It was something obvious.

Once my attorney had the case, yes she found fraud in the mortgage and yes she found a misallocation of my son’s payments. My son had to make a payment on one of his local taxes because it had been underpaid by the servicer. I don’t know though how they may have misapplied his principal or interest monies. Citi must have really messed up his escrow accounts.

Then came the fraudulent Assignment, and I had no doubt that Citi intended to steal his home. Now that my son has counsel though, he is no longer low hanging fruit and Citi knows they will have a fight if they attempt to foreclose. Of course my son and his wife are contemplating when they should file suit.

My son and his wife wisely purchased a less expensive home than they qualified for plus they made a large down payment and never had PMI.

[Yo_Mama]

14. Your son will lose his right if he does not exercise it

Because if they say he was underinsured, they have to justify it. If they can justify it, then he can always get his own policy. If he doesn't attempt to take that step, then any lawsuit will fail. If he upped the amount of the loan or got a second, then they are well within their rights and he needs to take action to get adequate insurance.

If your attorney hasn't told him to get his own insurance in the appropriate amount and notify the servicer that he has, then you NEED A NEW ATTORNEY. Like now, because this is total BS - there isn't a servicer in the country that can get away with this.

That right to get your own insurance occurs due to federal law about calculation of finance charges which affects disclosure of APR. Since an APR offense can trigger rescission, this is a major money offense and the servicer knows this. There is no chance they will not drop their force-placed insurance if he obtains insurance.

I'm concerned that by not exercising his right, he is losing his right. Further, if the home is actually underinsured, and if he has significant equity, then he should ensure that he is carrying enough property loss insurance. The force-placed insurance is only going to cover the creditor - what about his potential loss?

The right to get his own property insurance arises under federal law under 226.4 in TILA:
http://ecfr.gpoaccess.gov/cgi/t/text/text-idx?c=ecfr&sid=f70df4f928c1201a20aebf60bc0cc6ab&rgn=div8&view=text&node=12:3.0.1.1.7.1.8.4&idno=12

He can file a complaint with HUD if he does not get response from the servicer. The threat to do so will probably produce quick action.

That section defines finance charges. Property insurance wasn't included in the original calculation under 226.4(d)(2) because the following disclosure was made:

2) Property insurance premiums. Premiums for insurance against loss of or damage to property, or against liability arising out of the ownership or use of property, including single interest insurance if the insurer waives all right of subrogation against the consumer,5 may be excluded from the finance charge if the following conditions are met:

5 [Reserved]

(i) The insurance coverage may be obtained from a person of the consumer's choice,6 and this fact is disclosed. (A creditor may reserve the right to refuse to accept, for reasonable cause, an insurer offered by the consumer.)

6 [Reserved]

(ii) If the coverage is obtained from or through the creditor, the premium for the initial term of insurance coverage shall be disclosed. If the term of insurance is less than the term of the transaction, the term of insurance shall also be disclosed. The premium may be disclosed on a unit-cost basis only in open-end credit transactions, closed-end credit transactions by mail or telephone under §226.17(g), and certain closed-end credit transactions involving an insurance plan that limits the total amount of indebtedness subject to coverage.

There is also further commentary in Supp I:
http://ecfr.gpoaccess.gov/cgi/t/text/text-idx?c=ecfr&sid=f70df4f928c1201a20aebf60bc0cc6ab&rgn=div9&view=text&node=12:3.0.1.1.7.7.8.10.31&idno=12

8. Property insurance. To exclude property insurance premiums or charges from the finance charge, the creditor must allow the consumer to choose the insurer and disclose that fact. This disclosure must be made whether or not the property insurance is available from or through the creditor. The requirement that an option be given does not require that the insurance be readily available from other sources. The premium or charge must be disclosed only if the consumer elects to purchase the insurance from the creditor; in such a case, the creditor must also disclose the term of the property insurance coverage if it is less than the term of the obligation.

Since this was part of the original contract, it is still a part of the contract. But the contract also says the creditor has the right to force-place adequate insurance if he doesn't secure it or lets it lapse, and if your son or his representative does not contact the servicer and ask for details of the required coverage, secure it, and notify the servicer, HE HAS LOST HIS RIGHTS in the interim. Both parties have contractual responsibilities here, and what you have so far written indicates that your son may not be fulfilling his.

There are plenty of cases in which this is abused, but the first step to rectifying this is for your son to secure adequate insurance, or dispute that he has not done so. Every day day that he doesn't is a day that is costing him money.

Here's an article about some of the abuses, but you have to realize that failure to put his own adequate insurance in place, or at least notify the servicer that he already has, puts him in a very bad position.
http://www.americanbanker.com/issues/175_216/ties-to-insurers-servicers-in-trouble-1028474-1.html?zkPrintable=1&nopagination=1

[Yo_Mama]

15. PS: I hate Citi

I would believe anything of the bastards, but if there was a dispute about payments, and if Citi was adding amounts to the mortgage, then this would increase their exposure and allow them to require more insurance.

Since property taxes were escrowed, they may not have realized that property insurance was separate and are now just trying to justify a stupid mistake on their part.

Since you have the right to demand a payoff figure, you should do so to see what the balance is. If you suspect misallocation of payments, you should do this right away. Under 226.36(c)(iii) they have to do this:
http://ecfr.gpoaccess.gov/cgi/t/text/text-idx?c=ecfr&sid=f70df4f928c1201a20aebf60bc0cc6ab&rgn=div8&view=text&node=12:3.0.1.1.7.5.8.6&idno=12
More about escrow rights and HUD procedures.
http://portal.hud.gov/hudportal/HUD?src=/program_offices/housing/rmra/res/rightsmtgesrvcr
http://portal.hud.gov/hudportal/HUD?src=/program_offices/housing/rmra/res/respafaq

It sounds like the lender thinks your son has not made all his required payments and your son thinks he has. They have to pay escrowed property taxes, and your son has a claim on them if they had the money and didn't make the payments.

How long has your son had this mortgage?

[ms.smiler]

16. Yo Mama, my son had and has his own policy covering the home and contents.

I originally referred him to my agent. All of our insurance on homes, automobiles, life insurance and our business insurance which also includes additional vehicles, is with the same company and office. I’ve been with them for about 30 years. I have no reason to believe or suspect that my son doesn’t have sufficient insurance on his property. I readily believe though that Citi is simply claiming that his insurance is insufficient.

In my 3 ½ years of researching mortgage and foreclosure fraud, I’ve noticed that the banks readily violate state, federal and securities law. Citi twice violated federal law by refusing to answer QWR’s. Thank you for pointing out additional federal law they have violated.

My attorney comes from a top law firm in Philadelphia. I speak to her only about my case. I get some information about my son’s situation from him. I know he did what my attorney instructed but I can only state that I know about making a tax payment.

The attorney is ready to file suit, so I don’t yet know what points will be involved in the suit.

My son purchased his mortgage in 2004 and it’s a 30 year fixed rate. I never sued anyone before, nor has my son, but Citi was totally uncooperative and intent on stressing him financially. So Citi can deal now with the attorney and a lawsuit and we can relax.

If Citi was just trying to justify a stupid mistake, it works out well anyway for my son. I intended to have my attorney check his mortgage loan since mortgage fraud was commonplace. Thankfully, their nonsense just accelerated that professional review.