by Brian Mahany
Unless you are in the banking industry or have fallen behind in your mortgage payments, most people don’t understand the term “force placed insurance.” For those in the know, it is the financial industry’s dirty little secret.
A condition of almost every mortgage loan is that the homeowner must keep insurance on the financed property. If your home burns down or is destroyed in a flood, the lender wants to know it will be paid. Usually the homeowner obtains a policy directly from an insurance company of his or her choice and the premiums are rolled into the mortgage payment. When a homeowner defaults on the loan, the lender has the ability to obtain their own coverage and “force” the premiums upon the borrower.
Anyone who has ever missed a mortgage payment knows how quickly late fees, default interest and additional fees can add up. Miss a $1000 mortgage payment and you may find yourself suddenly owing $5000. These fees and charges make it impossible for many homeowners to ever catch up. The premiums for force placed insurance is one such fee.
If the banks simply substituted a low cost policy in place of the one originally obtained by the homeowner, no one would complain. But that’s often not the way it works. Banks and lenders soon learned their was a profit to be made. And some insurance companies are allegedly paying kickbacks to lenders.
Our law firm is a leader in mortgage fraud litigation. We represent both homeowners and lending industry whistleblowers in cases against loan servicers and lenders. (We presently represent a former mortgage company branch manager in the largest federal false claims act (whistleblower) lawsuit in the nation – HUD’s $2.4 billion case against Allied Home Mortgage.) We are actively seeking information from present or former employees with information about fraudulent force placed insurance practices.
If a lender or servicer is involved with federally insured mortgage loans and that lender is artificially charging inflated fees or receiving kickbacks, there may be a violation of the federal false claims act. Whistleblowers in such cases are entitled to receive up to 30% of whatever monies are collected on behalf of the government. In addition, there may be important class action claims against the lender on behalf of homeowners.
Mahany & Ertl – America’s Fraud Lawyers. Offices in Milwaukee, Wisconsin; Detroit, Michigan; Portland, Maine & Minneapolis, Minnesota. Services available in many jurisdictions.