WSJ | ‘Forced’ Home Insurance Policies Face New Scrutiny

‘Forced’ Home Insurance Policies Face New Scrutiny

Home buyers take out homeowners’ insurance policies to protect the value of their home and personal property in the event of a burglary or a natural disaster. The insurance is typically required to get a home loan, and if borrowers fall into default, banks have the right to make sure the property still has such coverage.

However, officials at the state and federal level have been concerned that insurers have been charging too much for something known as “force-placed insurance,” which takes the place of a lapsed policy.

This week, a new U.S. consumer watchdog and mortgage giant Fannie Mae have been promising a crackdown on those homeowners insurance policies.

In a speech Tuesday, the director of the new federal Consumer Financial Protection Bureau, Richard Cordray, said his agency will issue rules “to prevent (mortgage) servicers from charging for this product unless there is a reasonable basis to believe that borrowers have failed to maintain their own insurance.”

Rest here…

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Comments
2 Responses to “WSJ | ‘Forced’ Home Insurance Policies Face New Scrutiny”
  1. Beth A> says:

    Kimberli – excellent question!!!!

    In our case, our policy premium increased when we switched auto insurance companies. The cost was startling. We were re-pricing…and the policy lapsed (our error) briefly. I contacted the insurance company to have the insurance put back on = but at a lower face amount. The place wasn’t worth a million anymore….no was the full replacement value.

    Interestingly, the insurance co. (same one policy was with) felt it needed to “start over” by sending out a rep to photo, etc. — even though the cover lapse was just a few weeks. Literally – the full walk-thru, etc. I needed to make arrangements to be on-site for this process.

    OK….then, in the meantime, the mortgage service slaps a force-placed policy on the place for $1 million face…a HUGE PREMIUM and they didn’t have to schedule an insurance rep walk-thru w/photos, etc.

    THIS FORCED COVERAGE CAME VIA THE EXACT SAME INSURANCE COMPANY! It looks like they just reinstated the same coverage – but at a much higher premium. UNREAL!!!!!!!!!

  2. Even people that has home insurance sometimes they get that forced insurance anyway on top of the one the homeowner is paying, causing the homeowner to default and then there is a spiral of fees and outrageous penalties until the homeowner loses his home forced insurance is another scam form the banks !

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