Force-Placed Insurance May Not Just Affect Banks Involved in Miami Foreclosures

Our Miami foreclosure lawyers have been reporting on the newest issue to hound banks involved in foreclosures on underwater mortgages — force-placed insurance.

On theMiami Foreclosure Lawyer Blog, we have written about how New York authorities have begun looking into whether banks owned or were connected to insurance companies they paid to write policies for distressed homeowners.
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Now, American Banker suggests the force-placed issue may be going beyond just banks and into auto insurance and post-foreclosure insurance issues. Our lawyers believe that this issue is just another indicator of the problems that bank officials have created with their greed. Whether it be offering sub-prime loans to minority borrowers or using robo-signed documents in support of Miami foreclosures, banks have shown their lack of concern for following the law and upholding lenders’ rights.

With subpoenas being sent out, now American Banker believes that the New York investigation is broader than just mortgage-based companies. A list of companies subpoenaed by the government include mortgage servicers, insurers and insurance agents.

But the list indicates that bank subsidiaries that handle auto insurance and REO insurance were also on the list of subpoenas. REO insurance is used for foreclosed homes and billed to mortgage bond investors.

Some officials estimate that insurance companies receive billions each year from these forms of insurance and that banks get commissions on the policies they write. So, this brings up the question about whether banks that have ties to, or even own, these insurance companies were forcing insurance when they shouldn’t have been doing so.

Force-placed insurance is typically used when distressed homeowners fail to keep coverage on their homes and is designed to be protection for investors. The mortgage servicer will buy coverage for them.

Critics believe that while force-placed insurance alone isn’t controversial, the allegation that banks are demanding that insurers share their premium revenues since this form of insurance is as much as 10 times as expensive as normal forms of insurance because of the higher risk.

The bottom line for homeowners caught in Miami foreclosures is that it’s possible they were forced into this insurance and a greater portion of their monthly mortgage payment could be going to this more expensive insurance, which is cutting down on their equity. And if it can be proven that the bank and servicer had ties to the insurance company providing the insurance, it may be possible to show that a homeowners’ rights have been violated.

This is another area where banks are using their weight to try to maximize profits while throwing the homeowner under the bus. Whether it was long-standing robo-signing practices where documents were being signed by people who had no authority to do so or banks were doctoring paperwork in support of foreclosures, these bankers have shown that the law, ethics and other considerations won’t get in the way of them making money and following the company rules.

But these violations can support a homeowner keeping their home if it’s in the middle of a foreclosure. Homeowners have rights and consumer protection laws are designed to ensure companies aren’t allowed to mistreat people.

If you’re battling foreclosure in Miami or the surrounding areas, contact Jacobs Keeley for a confidential appointment to discuss your rights. Call (305) 358-7991.

More Blog Entries:

Newest Bank Problem: Force-Placed Insurance on Miami Foreclosures: January 16, 2012
Additional Resources:

Flurry of Subpoenas Raises Force-Placed Stakes, by Jeff Horwitz, American Banker