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Banks Colluding with Insurers to Rip Off Homeowners, Lawsuit Alleges

A suit being brought against Wells Fargo sheds light on the business of force-placed insurance.

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Justin Sullivan, Getty Images

A class-action lawsuit in Florida that moved forward this week highlights a little-appreciated aspect of the housing market — the cozy relationship between banks and insurance companies that often results in overpriced home insurance for already struggling borrowers.

As American Banker reported, a federal judge in Miami on Tuesday opened the door to a class action against Wells Fargo. More than 20,000 Florida homeowners can now sue Wells Fargo and an insurance company, QBE, for allegedly overcharging for insurance. More than $50 million in insurance premiums are at issue, according to American Banker.

The suit itself, filed last year, is sealed, but the judge, Robert Scola, laid out the allegations against Wells Fargo. The judge didn’t rule on the case but allowed it to go forward as a class action. In his decision, the judge cited the plaintiffs' claims that Wells Fargo and QBE “colluded in a scheme to artificially inflate the premiums charged to homeowners.”

The judge also said Wells Fargo has actually threatened to retaliate against homeowners who join the suit.

A spokesman for Wells Fargo said in an emailed statement that “the judge’s recent ruling only addresses the certification of the class in this case and not any of the underlying claims. We disagree with a number of the representations made by the plaintiffs’ attorneys.”

The bank also disputed the judge’s claim that it threatened retaliation for the suit, saying “we made our argument in a purely procedural context in connection with the class certification motion. Wells Fargo has no intention of taking the actions referenced with regard to our customers.”

QBE did not respond to our requests for comment.

The case sheds light on the world of force-placed insurance, an industry that has grown in the years since the housing crisis. Among all the suits and scandals related to the crisis, troubles with force-placed insurance have flown largely under the radar. Here’s some background on the lawsuit and why there might be more of suits to come.

What force-placed insurance is and why it’s controversial

Force-placed insurance is just what it sounds like — insurance you are forced to buy.

This insurance is meant to protect mortgage lenders against damage to homes. If the homeowner doesn’t have insurance on a house, or has let it lapse, most mortgage contracts allow the lender to buy the insurance and pass on the cost to the borrower.

Some homeowners, though, have complained of sudden and excessive penalties, as well as policies that seem to be added unnecessarily — and sometimes retroactively — to their bills. What’s more, the cost of force-placed insurance can be 10 times that of a regular policy, adding to the homeowner’s burden and increasing the chance of default, which is bad for both homeowners and investors in the mortgage market.

Lenders, of course, need to make sure that the asset behind a loan is safe. Force-placed insurance is expensive, the industry argues, because it is high-risk — if you’re the kind of homeowner who doesn’t have any insurance on your property, you’re probably also likelier to default. And because force-placed insurance often replaces lapsed insurance, insurers take on more risk because it has to happen quickly.

But as American Banker started reporting in 2010, problems can arise when banks also make big money off these insurance policies. Bank of America, until recently, owned the company that provided its force-placed insurance. Other banks, including Wells Fargo, contract with insurance companies and get a commission from the policies placed on homes underlying their mortgages.

In some cases, American Banker reported, an insurance company appears to be paying a bank to do nothing except pass along customers. The bank, in turn, has an incentive to force insurance onto its borrowers.

The charges against Wells Fargo

The suit alleges that Wells Fargo and insurer QBE inflated the costs of force-placed insurance policies and that QBE paid commissions to Wells Fargo — commissions the plaintiffs say amounted to kickbacks.

In his approval of the class-action suit, the judge summarized the plaintiffs’ allegations:

 

American Banker reported that internal Wells Fargo email messages seem to show that some bank employees were uncomfortable with QBE’s high premiums. In court proceedings, Wells Fargo said the pricey policies were justified because of Florida’s vulnerability to hurricanes.

Wells Fargo also argued that borrowers could have avoided the need for force-placed insurance and thus shouldn’t be able to complain about the expensive premiums.

To that, U.S. District Court Judge Scola responded: "That's like a defense for usury … you are going to have a defense that they live a bad lifestyle which leads them to be more in a position to be taken advantage of ...? That makes no sense."

The case materials were originally public before Wells Fargo got them sealed, citing business confidentiality concerns. American Banker’s review of the case is based on materials that it reviewed before the case was sealed, while the rest is gleaned from Scola’s opinion on the class-action designation.

Fighting a class-action suit

Wells Fargo and QBE didn’t want a class-action designation because they said individual borrowers' claims would vary too much, an argument that didn’t win over the court.

The judge also wrote that Wells Fargo actually threatened to escalate foreclosure proceedings against homeowners who joined the class-action suit. The bank’s arguments against the class action, he said, “unabashedly set out its threats to retaliate against any homeowner seeking to avoid the alleged excessive and inflated force-placed insurance premiums through this litigation.”


The judge based his conclusion on certain types of borrowers that Wells wanted excluded from a class action, including those who were in default. Scola claimed that for people in default on their mortgages:

 

Wells Fargo, as we mentioned above, denies that it planned to take these actions.

Not the only ones

It’s not just Wells Fargo that could face litigation. The plaintiffs’ attorneys have said they plan to file similar suits beyond Florida. The New York State Department of Financial Services subpoenaed 31 banks in October, including Wells Fargo, to look into what a spokesman called the “sometimes problematic overlap between banking and insurance.”

Last summer, a class-action suit in Minneapolis won more than $9 million from Chase Home Finance for 40,000 homeowners who claimed Chase forced them to buy unnecessary flood insurance.

There may be new regulations in the works clamping down on force-placed insurance, but so far nothing has been implemented.

In an op-ed published earlier this month, Richard Cordray, director of the new Consumer Financial Protection Bureau, promised “new consumer protections” that would require banks to allow borrowers to purchase their own insurance. This month’s big mortgage settlement, to which Wells Fargo is a party, also promises restrictions and regulations to reduce premiums and force banks to communicate more clearly with homeowners. But it is unclear exactly how the deal’s rules will be enforced or how they fit into the CFPB’s promised regulations. The CFPB did not immediately respond to our requests for comment.

There has to be more jail time for bank officers not just fines to discourage these types of things

yep,that’s Wells Fargo.I recieved a bill from them for Home Insurance when I already had one.And yes it was $200 more then what I paid a year on mine.Criminals with nothing more then Criminal Intentions,but they know now that they can TRY to get away with it.STUPID !!

Your story, which I think is important, is seriously affected when you use phrases like “buy more than $50 million in insurance premiums”. Uncovering the facts and reporting them is crucial.

Tell your interns that people “buy insurance” and “pay premiums”. This is not trivial. Like it or not the issues of today are economic; they require expertise in matters of finance and money. Not knowing (or appearing not to know) what a “premium” is tells me that you cannot accurately report the Wells Fargo issue.

Get it right. Hire an editor. I am sincerely trying to help here. But media ignorance of basic financial stuff is appalling.

I agree in principle with what Jack is stating.  ProPublica, which I support, is suffering from a lack of expertise in the topics of finance.  So, some of what they are reporting is outright wrong or the intellectual depth of the story is so shallow that the author glosses over or misrepresents esoteric points or data that they don’t understand.  I don’t have a problem with this article, per se, but the cracks are starting to show.  You need to be better informed to better inform us.  That means either you hire a journalist who has the intellectual capacity to understand financial concepts, complexity , esoteric points and their ramifications to our society or you lose readership as people start to associate you with shoddy reporting. 

This is a constructive criticism meant to help you be successful.  Use it.

Excellent reporting. It’s been clear for years now that the TBTF banks are politically connected insolvent criminal organizations. Frankly, no further evidence of this is needed. The solution is complete liquidation of the banks, which is the only way to value\write down their massive liabilities and cancel all those trillions $ in derivative contracts. Time to elect some people with the backbone to take these zombie banks off U.S. Gov’t life support.

The hand puppets of the kleptocracy are traitors and have destroyed this country from within. The billionaires have stolen our future, and are paying the jackals in Congress to wall your children into perpetual debt living in a toxic, non-regulated economic jungle.

William Levus

Feb. 25, 2012, 1:08 a.m.

This article is terrible!  No where do you tell the readers that house insurance is required by all lenders because it’s their money lost if the house burns down.  If the borrower stops paying their insurance then lenders need to go buy the insurance for the home owner and add the cost (forced placed) to the home owners mortgage loan.  Hey why do you think that an insurance company would give this very high risk insurance to the lender at a cheap rate?  Anyone who allows their ho to lapse is considered high risk.  As to the prior comments about dismantling large banks….I guess your Aunt doesn’t need a job nor the guy down the street or your buddy at the club. Why not write an article explaining forced placed insurance and sharing numbers instead of writing options in an effort to rial up uninformed readers.

To be fair, William, the author does refer to that, although probably not as explicitly as she could have:

“This insurance is meant to protect mortgage lenders against damage to homes.”

“Lenders, of course, need to make sure that the asset behind a loan is safe. Force-placed insurance is expensive, the industry argues, because it is high-risk — if you’re the kind of homeowner who doesn’t have any insurance on your property, you’re probably also likelier to default. And because force-placed insurance often replaces lapsed insurance, insurers take on more risk because it has to happen quickly.”

The issue here isn’t really that the force-place insurance happens or even that it’s expensive; the issue is the collusion between the bank and the insurance company.

Note to the editor: at one point, the article uses the phrase “force-priced insurance” instead of “force-placed insurance” which unfortunately is the part of the article other sources seemed to have picked up. That doesn’t look too good, and I have to echo Jack’s sentiments.

Well, most of you do not understand loan servicing technique and I commend the editor for telling the story. But that is the problem, most homeowners do not understand that it is not necessary for the servicer to force place the insurance unless you, the homeowner, do not take care of that responsibility.

Most of those responding to the article may want to know what the proper resolution is and has always been.  I have been in the business for 48 years, all the way from 1966 forward.  Here is the deal and the way it should be and was before the banks decided they were going to utilize another path so they could make the extra bucks, pure and simple.

The homeowner renews his insurance every year for $984.00 per year.  The mortgage company pays the annual premium out of the escrow account if there is one and if not, then the borrower must assure when he renews his policy that he pays the premium in full or at least pays it each month himself so that it does not lapse.

And yes, if the homeowner does not keep the home insured and it burns down, then the mortgage company and the homeowner lose. 

But here is where the problem begins:  Initially, the homeowner would renew the policy and send it in but not pay for it.  This is a policy that cost $984.00 on a principal balance of $125,000.  And this policy has everything and fully protects the homeowner with a decent deductible.

Here is where the rub is:  Rather than paying the policy that the homeowner sent in for $984.00 or no policy at all, the servicer orders the policy from their own affiliate or company they are contracting to and of course, the policy is basically three (3) times more.

The loan servicer receives a cancellation notice if the policy is not paid .
Of course the servicer does not want to deal with that, but if the homeowner does not pay his premium when he is supposed to or the servicer does not pay it on time, then that is what is going to happen.

The problem now exist for two main reasons, but not limited thereto:

1.  The SERVICER CLAIMS IT DOES NOT WANT TO RISK A POLICY NOT COMING IN ON TIME AND THERE WOULD BE NO COVERAGE.
Well, then they need to inform the borrower that they are paying the premium and will increase his monthly payment based on that amount; not that it is a bad thing, because the servicer is paying $984 for the homeowner chosen policy, not 2700.  The agent’s phone number and name are on the record so there can be no excuse for the servicer to follow up. The servicer is going to increase th epayment regardless so they might as well go ahead and pay the lower premium.
 
There is just as much work done on a forced placed insurance as there is on a homeowner issued policy and the cost is far less.  It cuts out the extra profit from the servicer but they should not be in the insurance buisness and setting themselves up to make profits on insurance renewals.  Besides they are paid to service the loan through the monthly payment servicing fee they retain every time the homeowner makes a payment.

2)  The volume of loans that each servicer now handles has quadrupled and all servicers are now using this as an excuse to hurry up and order a policy, regardless of whether it is more costly to the homeowner.  Thjis is an egregious action taken that the Congress should take exception and not allow to happen.

3)  Their excuse is the cost is higher because the insurance company issues the policy instantly without viewing the property or making an inspection.  That may well be, but the Servicer needs to pay on the policy that the homeowner sends in, particularly on loans that are in default.  Notice should be sent to them that they need to order the policy so the Servicer can pay it.  It is a far better policy and that is just the way it is.  Otherwise the homeowner is paying more for less and the servicer is getting paid for doing less.  And the fact of the matter is, that bill is going to be paid one way or the other and the homeowner’s policy is best.  In a way, the homeowner is asking for it when he does not take care of his responsibility to get the policy in on time and 30 days before which ins. agents know they have to do.

The servicer needs to pay on the homeowner’s policy when they get it in or pick up the phone and call the agen tto see if the policy has been renewed by the homeowner, if not, the homeowner should be notified and if no response, order the policy from the Agent of record in the file.

Next subject, 

Thank you.

Thievery and chicanery in the service of an agenda to maximize profits is wrong. And changing the rules, buying off legislators, and peddling pablum on captive, compromised media does not excuse iniquity, it only debases the discourse.
The coverup, the sweep it under the rug, blame the victim style just won’t excuse fact that institutionalized greed and excessive predation inevitably results in societal collapse.

Beware the American without a job, buried with debt and a growing conviction there is no future. The politics of division requires ever escalating violence to enforce injustice. More of our shrinking common resources are siphoned into the police state to protect a predatory parasitic gang that doesn’t make or produce any tangible product, and only participates in the public discussion to alibi not paying a fair share.

When a tax-dodging slime ball like Mitt Romney can run for President with millions squirreled away in secret offshore accounts,  it is conclusive proof  criminal enterprise has totally captured the American society.

Wow Anyfreeman:

    This has been going with regard to Servicers purchasing forced place insurance utilizing the method that they are now since l987.  This has nothing to do with Mitt Romney.  How did he get into the mix.  I am not for Mitt Romney however I am not sure why he would be singled out with the current administration, particularly those in the House are now being brought up for ethics violations, not to mention the money makers of Pelosi and Boener who appear to be working the market while employed “on the job”.  What more of an your face attitude is that?  Let’s stick to the subject. 

I believe that to the degree you are speaking of the effect on insurance, you have it exactly right.  The loan servicers have managed to change the system in their own best interest for force placing insurance and the regulatory has worked in tandem with them, to ignore what they are in my opinion may be determined to be criminal.  Each state could have set a law (we call it applicable law) that dictates what the insurance procedure can be in the state of ABC.  So, in addition to the Congress, you have the state legislatures who are doing nothing to protect you the consumer. 

The fact that you become delinquent is not necessarily your problem but one you are facing because of the down fall of the economy which clearly was the result of the financial services industry negligently servicing the loan which guaranteed that on top of the loan programs which were defective, the servicers simply came in for the kill, to make ure you became delinquent by billing you for insurance three times the cost of what it should have cost the homeowner.  Every month, the servicer gets a report of whom has not provided the policy, it is called an open items listing”.  Although they send a letter to the homeowner telling him he has not sent in the renewal policy, the servicer in my opinion should pay the last agent of record for the policy and have them issue it. 

Shame on the homeowner who does not communicate in writing what he intends to do about his coverage 30 days in advance. Most of the homeowners, believe it or not, are the very ones providing the opportunity for the servicer to order the force placed policy.  I am one might say an advocate for the people and certainly have gone after the servicers for all they have done to homeowners, but this is a subject that would not even be coming up if the homeowner would provide his policy on time, whether he could pay for it or not.  I have noticed that a few servicers have begun paying the policies provided by the homeowner even though they were late getting them in. 

The homeowner if he is minding his own store, regardless of whether he is delinquent or not, must communicate with the servicer and get a policy to them that the servicer has no right to reject, if so, ask them on what grounds.  The mortgage says they will order a policy of their choice if homeowner does not get one in.  However, it does not state that the policy cannot be relplaced by the one the agent sends in even if a few days later and some servicers are cancelling the force placed policy if it is in the first two months. 

As much as I hate to admit it, the servicer is taking care of the responsibility that is the homeower’s but in doing so, they are also taking advantage of the homeowner.

This nation is riddled with corruptness and the behind the scenes practices of our politicians is immeasurable. 

It is my belief that 5% of the people have been directly harmed by the mortgage industry, but 95 % of the people have been harmed indirectly because when the lenders and servicers began moving away from the rule of law, ethics, honesty and in fact, stretching the Mortgage provisions beyond that which was allowable by them, this country has gone to hell in a hand basket.  I concur with Anyfreeman as the frustration becomes overwhelming for so many who simply cannot defend themselves against the “Monsters of the Land”.

@Joyce - that’s a very thoughtful, informed and well reasoned recitation - thanks for your concise points.

My post was more about the conditions that create a Mitt Romney (an example) Governor Romney would have excelled in any system he found himself in- the outcome of his career, sadly is similar to John McCain’s - at least in his campaign - so I plugged him in as the example. I have no personal enmity - he is just the most recent poster child for the elite- to attain power and prestige he has had to flop on climate change, health care, economic fairness, etc.

Your point regarding the current administration is fair, and serves to make my point. Look how Obama has become a tool also. The craven cave-ins are too numerous to itemize, the important point is to watch who benefits, and who triumphs with each betrayal of conscience, abdication of principle, and capitulation to the powerful mafia running the game.

And the state legislatures - those “baskets of snakes” should wear price tags and have wear NASCAR style jackets with their owners’ logos on them.

Your assessment of the collateral damage caused by the housing bubble is logical in its framing, but is incomplete in recognition of the largest transfer of value, equity and savings in more than a century.

Multiple generations’ blood sweat and tears
were vaporized, entire communities devastated by the corrupt practices of predatory financial cabals. The cancer started by the wealth transfer in more than 150 years is still spreading. The MERS gang ‘hoovered’ all the money out of your cities, evading taxes while destroying 400 years of property law.

What happens now after the wall street party in your home? A long painful hangover, for you now, but unless the bankers and their lackeys are held to account soon- tell your future good bye!

Hey Anyfreeman:

In 2006, I wrote a book called “Not in my backyard Mr. Lender"talking about all of the hideous events of what was on the horizon at that time, yet, I held back on printing it because I decided to fight the good fight to try to defend homeowners that could not defend themselves because they had no funds to do so.  I have worked on the front line and in the trenches going on five years now, without compensation, because I did know what was going to happen to families.  24/7 I answered my phone and believe me, I got plenty of calls after 10:00 oclock at night because people had gotten home and found they had been served with foreclosure notices.  I went through the 80’s and the 90’s when ghost town like communities were everywhere in certain parts of the country. I begged Fannie and Freddie to cut out the foreclosures, but no, they kept going and all of the properties in those ghost towns ended up for 30 and 40 cents on the dollar to investors who hung on to them (while renting them out) for ten years and then the vultures collected on pay day when they were sold. 

Talk about suffering, I knew the suffering of these families as the children were taken out of the schools and communities they once felt so safe in.  That is why I do what I do.  And I can assure you, the lenders and their servicers absolutely have no use for me.  What has been so absolutely amazing, and you make the point, no one, no sir, not on the level of making something happen, did any administration, regulatory, non profit, realtors or anyone remotely connected, did one thing to assist the homeowner.  No public announcements beginning in 2004 or 5, were put out so that homeowners buying these home would have had a clue. And because no one spoke up or did one thing, this country’s economy as a whole, has suffered, including those homeowners who had not experienced any kind of hardship.  Yes, it was far reaching.

Romney is a great disappointment and so was Perry and all the rest.  Romney said, we need to go ahead and foreclose and let the market hit bottom. What a statement, and powerful, because it showed his complete disconnect for all Americans. What he and Wall Street want us to do is completely forget about the Rule of Law and allow these culprits to walk away scot free.  They made out like the bandits they are, but we call it Grand Theft here in Texas.

I am saying they have a disconnect with the American people, not that they are bad people themselves, it is just that they have no appreciation for the suffering of others.

The administration has worked in tandem with the lenders by putting out those phony assistance and recovery programs.  He knew they would not work and they haven’t but he wanted to act like he was actually doing something -  this latest speech of his will do nothing more than enhane the pain the people are already feeling.

The regulatory has taken more of my tongue lashings than they want to think about.  Who do you think is to blame for the largest transfer of value and equityand savings?  No, I don’t fail to recognize the depth of corruption that it took for lenders, servicers, title companies, foreclosure mills and private investors to pull off this biggest heist in American history.  I have measured it tooth and nail.  Simply put, all they had to do was produce a product, good bad or indifferent and the game was on.  But even worse was that those who were put in place to protect our societyabsolutely allowed such wrongful acts without lifting a finger to stop it.  That is where the real shame of it all is. 

Yes, you said it all, and hitting the courts every day and seeing homeowners being thrown into the streets by the Judges and the Courts, -  I may very well have to tell myand my children’s future goodbye.  So far, nothing has been done and the AG’s gave us up once again.

Enjoyed and thank you for your comments.

Does the phrase “thieving bankers” ring a bell?

Big banks
Big government
Big pharma
Big oil
Big problems

I still can’t Believe they are allowed to stay in Business after all the Fraudulent Activitys were brought out !!!! True Justice I guess is a thing of the past.

Thomas Ciulla

Feb. 25, 2012, 6:18 p.m.

Without any notice and without my knowledge or consent, Bank of America and BAC Home Loan Servicing, PO Box 1206, Fort Worth, Texas 76161-0206, (8661265-3321, notified me, Thomas Ciulla Jr., DBA Reps Realty #4437, in a letter dated January 21, 2010, that as of January 15, 2010 flood insurance in the amount of $21,337 had been placed on my condo property located at 750 SE 6 Ave Unit 325, Deerfield Beach, FL. 33441. If proof of existing policy was not received BAC would add the cost of the policy, $435.85 to my mortgage payment.

On January 27, 2010: I received an additional notice from BAC Home Loan. BAC without my knowledge or consent, purchased fire insurance in the amount of $21,337 on the property from December 16, 2009 thru December 16, 2010, in the amount of $474.06. They demanded proof of duplicate coverage before the charge would be rescinded. I spoke to the condominium association and the insurance broker that covers the buildings. They assured me the coverage on the buildings was more than adequate and we both faxed copies of the insurance to BAC.

February 7, 2010: | received notice from BAC that the flood insurance was duplicate coverage and the charge of $435.85 would be canceled.

April 20, 2010: I received an “Insurance Deficiency Notice” from BAC that the Collateral Hazard insurance document received did not provide the information required. What BAC required was not stated?

May 4, 2010: I received a “Notice Of Flood lnsurance Requiremenf” from BAC. The letter stated they did not have a copy of my currant flood insurance policy, (Of which they had previously acknowledge was duplicate coverage.)

May 17,2010 1:18 PM Email: From: “rep*s realty’ <repsrealty@yahoo.com>
To: .(JavaScript must be enabled to view this email address), .(JavaScript must be enabled to view this email address), and .(JavaScript must be enabled to view this email address).

The charges Bank Of America has levied on my account, Thomas Ciulla Jr. (DBA Reps
Realty #4437), are erroneous and without my knowledge or express consent. I have transferred the remaining balance on deposit and directed the account be closed on May I 1, 201 0 @1 0:59 AM. Further, I have paid off the mortgage balance of $7,877.19 on the property located at 750 SE 6 Avenue Unit 325, Deerfield Beach, FL as of May 12, 2010. I refuse to continue to do business with such an unscrupulous company. Any monies Bank Of America has charged my checking account in excess of the pay off amount I am holding in dispute. As of May 19, 2010 Bank of America has not closed my Reps Realty checking account and has an added a charge of $157.55 without my knowledge.

August 3rd, 2010: I received by certified mail a Notice Of Intent To Accelerate demanding $495.28.  If payment not received on or before September 1st, 2010, they would proceed to foreclosure. I sent a check in the payoff amount of $7,877.19 on May 12, 2010 to BAC Home Loan and received an Escrow Account Review stating, “Escrow portion of your payment is changing to $0.00 effective June 16, 2010”. I have contacted BAC Home Loan (800 669-6607) and stated on the phone and by fax on several occasions over the past three months that the loan was paid off and what is the reason for the charge. None of their representatives knew the basis for the charge and none of their representatives have called me back. I thought it advisable to pay the $495.28 to avoid foreclosure and sent a cashier’s check to BAC Home Loan on August 20, 2010.

well fargo did this to me also for five years they added homeowner insurance on my morgage and I already had insurance, It took months of fighting to get it off and they never took off the interest princinpal of the excess payment price because the monthly payment was excactle the amount of the insurance so that the principal never went down, every years they did this, awful, finially moved my mortgage to a credit union

hey joyce,michael here, i hope you are well.a very good friend of mine that i am helping had this exact thing happen to her.her x husband was making the mortgage payment to aurora.auroraforced placed flood ins ( house was not,is not and has never been in a flood zone according to fema)loan went into default.foreclosure sale date , the whole works.anyway,we were successful in obtaining the modification and are now ready to persue the forced placed battle.may i call you

to Thomas and Janet:

Both of you were lucky because you were able to either pay your loan off or move it to another company.  That of course is what was key in keeping the lenders in line many years ago.  Now they have everyone so boxed in, that they feel they can do and operate as they choose.  Unfortunately most cannot refinance their loans anywhere else because the values have dropped as you know and a lot of people are without jobs.  These people are stuck and subject to victimization by the lenders.  And with the support of the Feds, most homeowners won’t have a prayer if they run into any hardship which prevents them from making their payment.

The financial institutions continue on their arrogant path of destruction so I am now beginning to wonder, for the first time, is there any connection between the investors that buy up the foreclosures and the banks.  Who is going to be the real owner of that foreclosed property because I can tell you, it would be very telling for banks to keep the properties, rent them out and then sell them off in 10 years while the taxpayers take the hit for reducing the cost the bank would pay for that home and allow him to build an equity from the ground up.  The general public would figure it out if they held on to the properties, but by doing it this way, they have someone else taking care of the maintenance and oversight of the property until it gets sold.  The banker may now be investing in some of the choice properties, is just a thought, but like everything else if it is possible for them to do it, it will be a well kept secret I can assure you.  However if we find that numbers are small for the investors, then that scheme would be difficult to bring to fruition.  They have made money in every other respect on the foreclosed loan, why not take it a step further.  Just a thought.  And just think, is Geither still passing out 0 or low interest loans to the investors who may be putting very little into their bulk packages of homes that they purchase, with no personal liability if they - give it up.  What a partnership.  My guess is going to be that property values will come back and certainly with 10 years behind us, it is going to happen: unless the economy falls.  Either way, the banks cannot lose.

Cash is King!  Time to walk away from all things that cannot be purchased using cash.  Can’t pay cash,  you cannot afford it.  The wealthy do not use any credit unless it is being given to them at 0% interest.  We need to live below our means, move any financial assets we have to credit unions, purchase Roth IRA’s and Iife Insurance and call it a day.  Protect yourself by staying away from Banks, they are not friendly, they are not your partner.  They are financial Bully’s plain and simple.

Elizabeth:

I could not agree with you more.  I do business with a mid size bank and have for the past 15 years.  I weighed and measured whether or not this bank was participating in such non sense and they were not.

If only more people would stop, look and listen to what the banks are doing to them, they would be able to stop these practices by the banks.  But the people are not going to do it and the feds and the Congress are going to support them.  The people have to call for change by simply making a legitimate move to require them to straighten up or ship out.  One day of course, they will wake up to an even greater nightmare than the one we are currently experiencing.

There are plenty of banks and credit unions that can remember that the people must not be continually goughed (I don’t know how to spell it) and so far they don’t participate in such activities.  The people have a choice, but unfortunately, they are not going to exercise it.

Hey Michael:  Sure I will be glad to hear from you.

There simply is no way that the lender can require insurance if the property is not in a flood hazard area.

  I am sure you have a flood search to back it up and in fact, if you can,  always refer back to the Appraisal which was ordered at the time she got her loan. It would have the map number previously used and you can check that number against the map number they are saying applies now.  If it was not in, then they should submit the map that says she is in so that the borrower will have an opportunity to defend herself with a good solid argument, 

Also tell her to check her closing file because there will be a ““disclosure in that which by the lender which clearly states that although she is not in a flood hazard area at the time this loan is being originated that, in the event, she later falls in a flood hazard area, she agrees to secure the flood insurance or the lender may do so if she refuses.”.  Get her to pull that disclosure out because they put it in their own words what must be done and you can show it to them.

This may be a breach of the contract I cannot say because I am not an attorney, but give them a letter stating they may have and you may get an attorney’s opinion.  There may be a required 10 day written notice to give them the opportunity to correct the issues that you have with them.

It is ridiculous for them to cancel the policy they wrongfully forced place on your propoerty without make the correction to any charges that may have been added to her account.  Come on now, that does not make sense.  Why don’t we ask them to just hit us in the face.

Then once they agree they goofed, and still fail to correct the errors surrounding their charging her for insurance and cancelling the same, then, they have a major issue.  In her state, that type of claim may be a violation of the law and the contract (the mortgage) and may go so far as to render note and lien null void.  Now who in the world wants to get into that kind of fight.  Trust me, the bank would be nuts to do it; unless they have come up with some new deal that I am not aware of.  or they are just going to continually and blatantly take advantage of homeowenrs.  You know our voice has not been hear and never will be at the rate we are going.  Just look at what the AG’s did.  Did they cave or what?  I think they were following Obama’s lead when he bowed to the Saudi’s.  Oh well, don’t want to go there. I am not an attorney, but I used to do flood search determinations and was familiar at one time with the laws governing the lender’s rights to do this or that. 

Call me if you need to.

Thomas:

It is truly pathetic what they have done regarding the servicing of your loan.  This now becomes a cost to the borrower in time and peace of mind which the servicer has bestowed on you.  Perhaps you should send them a bill for the time it took to clean up their mess or at least ask them for a refund of a portion of the servicing fee .0325 they get out of the monthly interest you pay them each month.

Homeowners across this nation are beating themselves up trying to correct the errors on their mortgage accounts.  And I can assure you, it is not just the mortgage companies that are playing this game - just look at the cable companies, and others who are doing the same thing. 

I told everybody years ago, they need to call in General Patton and Chris LeMay, general in the Air Force to put a stop to this non sense.  I

Negligent Loan Servicing Technique has become the name of the game and the people are having to play it at their own expense.

Where did the mortgage companies get off thinking they do not have to train their people or, do they do this on purpose?  who knows?  Think of it this way, the less the servicing people know, the better.

In the old days - mortgage companies operated on the basis of:

the loan officer brings in the business/product which generates a profit, but it is the loan servicer that maintains those profits by preventing losses.  Well, that certainly has changed hasn’t it?  Now the idiots make profits off of the mistakes they seem to generate.  For example not giving you credit for the amount added back to the principal.

The whole thing makes me sick.

Rudy Gonzales

Feb. 26, 2012, 4:51 p.m.

There has long been collusion between banks and the insurance industry and many insurance companies have started their own banks to gain further influence. One can get around forced insurance but many homeowners do not have the moxey to question or deter this additional costs. Banking and insurance have had a cozy relationship and there is one more insurance that has not been addressed. Banks have mortgage default insurance, which cover them when they have to take back a property through foreclosure or the customer walks away. Their full mortgage is covered and in a short-sale the bank can make out twice. Once form the insurance and then again when a short sale is executed. That’s how and why the banking industry must be regulated even stricter. The TEA-GOP-Republican candidates and members of Congress know and have known about this friendliness and collusion for years and have done nothing about it. That’s why the TEA-GOP-Republican party must be cleaned out and new blood elected to fix the numerous problems effecting our economy. Using many mortgages in “Derivatives” banking made huge sums of money trading and moving these instruments around. By voting in a TEA-GOP-Republican candidate, you are perpetuating this conduct.

Hi Rudy:

I have to tell you that collusion or no between the insurance companies and the banks, the people have full control over this issue and if they are capable of buying a home, they need to check out the basic requirements of what is expected of them.  And the Deed of Trust and /or Mortgage makes it clear.  There is nothing difficult about it so if they get victimized, they can use that Mortgage provision to protect themselves.  The problem is a lot of these homeowners simply do not challenge the bank, but the foremost problem is, if they would order their own insurance and pay for it or make sure the agent gets the payment from the servicer (if the homeowner has an escrow), the borrower will never be forced to do battle with the servicer and any insurance company.

This whole is issue is much less complicated and certainly the homeowner has control.  The banks take enough out of us, I realize that, but this is one issue that is cut and dry.  We are actually promoting their capability to pull off such a scheme.

I am an advocate for the people and when someone calls me about something like this I just sit back and think, what is going on.  The homeowner has a right to order his own policy, but if he does not take care of his responsibility, then they are going to move in on him and take their best shot.  I admit that there are those who have legitimate claims whereby a servicer fights to the death to keep their policy in place, but the percentages are much lower that what most think. 

Pull out your Mortgage and go to the provision that is very clear that tells you what your rights are.  But make sure you have done your part to have your policy issued to the mortgage company in plenty of time so that it is of record when it is supposed to be.  Many homeowners end in their policies on the date it is to renew which would leave little time for the servicer to order insurance in case the homeowner does not to on time.  It only takes one fire to burn the house down or some other issue (for example, no one can buy insurance if there is a hurricane in the Gulf or the area where the property may be in close proximity)  so you see, get the policy issued 30 days before so it arrives on time and in many cases even though you don’t have the money in your account, the servicer pays it anyway.

Back in 1987 we had a big to do over this issue and instead of the homeowenrs winning it the way they did, the servicers gained the right to charge us interest on any advances they made on our behalf.  They never did that until the people started arguing about escrow accounts.

sorry to be so wordy but there are those out there who need to know more exacting information.

I think the issue at hand isn’t as cut and dry.  If you can buy a policy for $1000 a year, yet somehow end up in this situation, why would a bank charge you $3000 dollars?  All of your information is on file for the $1000 policy, so other than the bank getting a payment/kickback, why is the cost driver up so high.  And if the bank routinely works with a specific agency that can write fast policies then shouldn’t the streamlining of the process in using this sole source for coverage result in better priced policies? Even if their is some time constraint on the process, if huge bank like Wells writes these policies all the time, then the streaming lining should result in better pricing.

Mike

That is the point.  It is cut and dry and we processed policies by paying on the ones that the borrowers sent in regardless of whether the money was in the escrow account or not and whether or not the borrower was to pay his own.

The whole issue comes up because around 1987, the lenders decided they were going to use the excuse that homeowners did not get their policies in on time and many sevicers send out two letters trying to get homeowners to answer and send in their policies, but the homeowner doesn’t do it.  This then gives the bank to use the excuse that the bank’s insurance group or contact will write a policy without inspecting the property and when they do they charge a huge premium 3 x what the homeowner would have to pay -  thus they get a big commission.

These servers may be servicing thousands of these loans and they say they cannot take a chance on being caught without insurance. A fire or flood or hurricane can cost millions if the properties are not covered.  Going through the winter, pipes break and everything else so when facing a freeze and no coverage it puts the servicer at risk.

HOWEVER, THE HOMEOWNER CAN GET HIS POLICY IN ON TIME LIKE HE IS SUPPOSED TO DO AND THEN IF THE SERVICER ORDERS ONE OF THEIR OWN, THEN YOU MUST UNFORTUNATELY BEGIN THE LONG FIGHT TO MAKE THEM PUT THE POLICY IN THAT YOUR ORDERED AND GOT THERE.  THEY ARE NOT GOING TO ORDER POLICIES AND THEN TWO MONTHS LATER A HOMEOWNER SHOWS UP WITH HIS AND HAVE TO GO BACK IN AND CANCEL AND DO ALL OF THAT WORK SO YOU CAN HAVE YOURS IN THERE.

IT IS SIMPLE.  GET YOUR POLICY IN ON TIME.  AND IF THEY REPLACE IT WRONGFULLY WHEN YOU HAD YOURS IN, GO AFTER THEM.

I’ve been caught up in this BS on more than one occasion. Even when I had current insurance because when you change insurers if the bank isn’t properly notified they just hit you with these insane premiums, usually 4 or 5 times what the going rate is. It cost thousands and there is little you can do and what you can do takes days of work to unwind.

These abuses by a supposedly “self regulating” industry is exactly why we need a consumer protection agency with teeth.

Paul, of course I agree with you in your comments but not all banks are doing this.  In fact, you make an excellent point and I have long wanted to see an organization (who has an attorney on board) work on behalf of the homeowners for these various, what I consider to be” intentional negligent loan servicing technique, thus a breach of the Deed of Trust by the loan servicer.

Not sure whether you know it or not but most companies, cable, etc., have so many lawsuits against them, that they have an agency that receives all of their lawsuits.  In the case of the homeowner, we need to have a “homeowner’s recovery damages” (manned by an attorney, where all we do when a servicer wrongfully bills the borrower or will not correct his account, files a notice of intent to sue for breach of contract.

It is because we have no separate agency set up to pass through our complaint in a legal way to make the servicers perform.  Plenty of people representing the lenders, but we have to start building our own agency.  And it can be done with the cost for same being billed to the servicer, unless of course the borrower did not properly state his complaint.  People need jobs, get started - such an agency in every state would be helpful.

We are all sick of the manner in which our regulatory has handled our defenses and as such, we need our own, separate and a part from those agencies who have shown what they are worth - “O”.

You forgot to mention that servicers intentionally withhold the insurance payments made by borrowers and thuse dishonestly CAUSE those borrowers to lapse on their policies specifically to stick them with the force-placed insurance.

Most of these lapses are NOT borrower driven but brought about intentionally by dishonest servicers who commit fraud.

Borrower have across this nation, the proof that they have made their payments on time and thus, have the documentation that proves the servicer committed deceptive trade practices “if you can prove it”. 

Proving it would be simple therefore, you should do that and many have.  What a shame you have to resort to such action at your own time and expense.  No, I did not mention that they intentionally do this because I have never had one client that could prove to me that they did send in their policy or had the money in on time except for very few people.  That being said, you need to give them a certified letter to the effect that you can prove they intentionally withheld your funds or your policy so they could force place the insurance. 

I have had a couple of clients file in the small claims court in the proper jurisdiction when these types of issues come up.  Nothing to stop yu from doing that if you are sure you can prove it.  They may have to pay you for your trouble, time and expense and the courts would not be happy campers because this was an intentional act on the servicers to deceive you so they could make more money. 

I am not an attorney but an advocate and most people won’t take the time to send the letter responding to servicer’s action.  I have found that some servicers immediately correct the account and put the credit back to the escrow right away.

This is why we need the ready made third party agency that can take care of the the issue.  People should see an attorney about such issues which of course no one can do because of the expense which is what they are counting on.  It does not keep you from presenting your proof and if they don’t again, check out the small claims court and go to a legal service for advice.  Certainly it is cheaper than letting the servicer get away with charging you three times as much.  Let’s face it, if more people would follow up on their own complaints, servicers would not resort to such illegal acts.  make sure you can prove it though.see an attorney if need be.  It may come under the Fair Debt Collection Act.

to Pro Publica:

Would the editor of this paper give me an opportunity to explain to a reporter or to write the article myself that there was a resolution to the housing crisis back in 2008.  Hundreds of billions have been wasted in the feds attempt and tax payer bailouts to correct the demise which appears to be ongoing.  Instead of hundreds of billions of dollars being thrown away, we could have spent and estimated 10 billion that would have saved for three years, at least if not more, 1 million homes from foreclosure and because we were doing this in 2008, more than likely, values would have been contained and loss of jobs would not have been the resulting immediate issue which it is now for millions of people who lost their job because of a failed economy.  In otherwords, it would have had the trickle down effect to some large degree and most importantly, the banks (and their shareholders) would have been the losers, not the taxpayers, or the homeowners or the personal investment portfolios in retirement or profit sharing plans which bought up this stuff.  Now the AG’s are going to waste the 25B as property values continue to fall furthering the degradation of the housing crisis.

The AG’s have done us no favors, pure and simple and the Congress and the Politicians need to take a hike.  I hope to see them in Washington in the Summer and give them a piece of my mind for their total negligence in overseeing the regulatory who, by the way, reports to them.  Not only have they not performed, they have intentionally neglected protecting the people who voted them in.  Well, the people should know what to do about this at election time. 

Even now the plan might work, but the $25 B that the AG’s settled for is not going to reimburse the homeownrs for the damages and pain that they have suffered.  My plan would have prevented it from happening in the first place.

Another way the Ins. Co’s are ripping off the homeowner with mandated Ins. is where they value your personal property at 70% of the appraised value of the home.
I can understand the lenders need to require homeowners Ins., however why should the homeowner have to except a mandated value on our personal property?
My Ins. co. has my personal property valued at $122,000, and yet I feel that I can replace my losses for around $30,000 and would be satisfied with that amount.
There just may be the potential for another class action lawsuit here.

Under capitalism, man exploits man. Under communism it’s just the opposite.  ...John Kenneth Galbraith…

They can’t as far as I know.  They are only authorized to cover the policy for replacement cost so one may be able to rebuild the house.  The investor of course is the one, as you know, who must be protected; however, coverage on your personal property is yours to dictate.  If they are doing otherwise, They need to communicate to you this message.

Lender has aright to dictate the amount of coverage you hold on personal property even though we do not have a lien or any security interest in the contents of your home.  I bet you would never get such a letter because there is nothing, to the best of my knowledge where Fannie Uniform applications include a provision for that, so perhaps it is the insurance company that is quoting what they want and using the excuse that it is a state regulation by their insurance underwriters.

Like I said, get the servicer to put it in writing.  I do not believe they will.  If they do, I sure would like to know about it.

I had no idea the servicer was doing that, if indeed they are.  I really believe it is an insurance underwriter that is doing it without authority but if you are to get their policy, they made that much coverage a mandate in order to write it under that insurance carrier.

This is just another reason for homeowners to send in their own policy and make sure the servicer does not relplace it with theirs.  You are just filling their pockets when you do that and you signed a deed of trust or mortgage that allows them to do it if you DON’T PERFORM.

Good luck.

We already had this battle with the lobbbyist for the servicers and mortgage banking people.  HOmeowners wanted to get paid interest for their money being held in escrow.  That was a bad move, became it appears it opened the door for servicers to charge you interest when you don’t have enough in your escrow account and they have to advance money on your behalf.  These used to be interest free loans to the homeowner when taxes and insurances were funded.  Now, they charge you in most states.

However, everyone is right here about the ridiculous action which the servicers are taking when they force place.  I will give a call to the class action suit attorney and maybe I can give him some pointers.  He needs to know as much as possible early on so he does not spend needless time waiting to figure it out.

Thank you Joyce, I will contact my agent again to find out if it really is a mandate, or as he said when I asked him that it was a formula used by the industry to calculate that value.
I also need to speak to him about a 12’x12’ shed that I built on my property out used tin that he placed a value of $17,400 on, way out of line. I believe I could have a brand new two car garage built for that price.

Is the shed part of the loan collateral or is it something you built later.  If it was not on your original appraisal as part of the collateral, you may be able to dictate the amount of coverage, there again, depending on underwriting requirements of the insurance agency.  Just check it out to see if you have an option if you think it is too much coverage.  You don’t want to be caught short however in case you have a bad storm or fire.  So give it some thought.

Your welcome.

This is just the tip of the iceberg. I run a website on facebook and assist in several others that get over 60,000 hits a day looking for help in this morass. The problem is so convoluted that is is difficult for even our attorneys to follow. The issue begins with an actual conspiracy to defraud. Yes I’m actually saying that there has been a conspiracy here as we can prove it. The Banks/Servicers and the Insurers are conspiring to defraud by forgery and the failure to follow the rule of law. The banks and the servicers are supposed to file paperwork that gives them the right to do certain things and they are not doing so for other criminal reasons to numerous to list here, but the bottom line is that the most profitable line of “insurance” for the industry is force placed for obvious reasons like, 1) they claim to take out insurance when in fact there is no policy ever issued since they don’t own the note and have no legal authority to ever get insurance on the home much less claim they are somehow the beneficiary because they’ve failed to file at the state and county level. This is blatent insurance fraud and we’ve already forced the insurers to refund monies and in every instance they then forge false documents trying to make it appear as if what they are doing is then somehow going to magically become legal.  2) the insurers are allowed to violate the pooling and servicing agreements of the banks and servicers by tracking the homeowners private information without permission. This is the sole area of rights laid out in the PSA and it is being ignored. These are only 2 of over 2 dozen criminal acts being perpetrated against helpless Americans. If you want more information feel free to find us on facebook. Homeowners Against Mortgage Servicing Fraud.

Roy - great post.

We have been following the whole mess since deregulation in 1998 - and it has been going on and will continue to go on until those that have the authority do the right thing.  They have not reached that point.

It has been difficult in some cases to get the proof needed to prove what has been going on - but in some cases, we are able to get it.

keep your post going.

Donna Blizzard

March 2, 2012, 6:30 p.m.

Just to add a few thoughts to my husband’s comments. Look up the Ellington Securities vs. Select Portfolio Servicing case. It was moved to the NY courts from Travis Cty, TX. The case alleges that Select Portfolio Servicing (SPS) hid force placed insurance income from the investors by listing it as “corporate advances.” According to Ellington, this was done in order to also bill the investors for the insurance too! SPS was double dipping.  Ellington furthur states, that SPS got kickbacks through their own Pelatis Agency which is hooked to Balboa. Look up the 2003 FTC case against SPS then known as Fairbanks Capital to read up on the abuses. SPS continues the same behavior in our case alone post FTC settlement violating Best Practices. Why doesn’t the FTC go BACK after them for violationing the agreement?  Isn’t there something odd when a third party debt collector/servicer is allowed to put themselves down as mortgagee/beneficiary in insurance?  Especially, when the trusts for these MBS’s are closed down? Can I take out a policy on my neighbors home without an interest in their home? Would an isurer let me do that? When you catch these servicers with a missing assignment of mortgage they put the loan notes back into these closed trusts violating IRS REMIC law! Another thing to check out is the servicer listed as “Lender” on your IRS 1098-End of the Year Financial Statement!  Anyone smell a rat?  These loan notes get paid off with their insurance schemes. The servicer gets these homes as a reward for aiding the banks!  If the servicer can speed up foreclosure due to illgal FPI fees, then the banks cash in on those insurance policies the took out…credit default swaps!  Remember, they copied loan notes and took out many policies. One $200,000 home could be worth millions in foreclosure!  This is team work to perfect securitization fraud! The insurance companies make it all possible!  Donna (FB site: Homeowner’s Against Mortgage Servicing Fraud)

I presume all of this has been proven and is being proved in a court of law.  It certainly sounds like it.  I have not seen any reports that speak to the issue which you have just mentioned, but if all of that is correct, the find would be monumental.  Tha AG’s have not been able to come up with such information or if they have, they must be sitting on it.

Hello Joyce,
I discussed my homeowners policy with my agent and learned that the personal property value, figured at 70% of the appraised value of my home is not a mandate.
Though he was hesitant about making any changes to my to my policy I convinced him that I would be comfortable with $30,000 in coverage, as compared to $122,000.
He then said that as long as I asked for coverage below $40,000 he might be able to do something. I’m not sure why that has to be the case.
He then said that the only policy he can write would be based on a depreciated value of my personal property, rather than a replacment value at the time a claim is made.
If that is the case, the problem I would have with that is, if I were to get a new policy, whether it would have been with him or someone new, my personal property like my couch, bed’s,and appliance’s, though they are already 25 yr’s old are still in good shape and funtional, can’t hardly be depreciated any more then they are at the time my new policy is written.

He then called ( Allied Insurance ) who is the policy holder and informed them of my intent to change the policy, to which they said that they would not make any changes and that the policy would stay as it is.
Pretty much saying take it or leave it.

I then told my agent that I will be shopping for a new policy. My concern now is if no other company will give me the policy that I desire.

Hi JJ:

It seems to me that you cannot determine whether or not you want to stay with this agent and his quote until you make the proper investigation and shop your insurance needs without expressing to the company quoting, what you have been running into.  That way I think you will get an honest quote.

The Congress and the regulatory have known about this situation which appears to be collusion between the insurance companies and the banks.  And they have done nothing, so now it is up to you to take the time necessary to find out for yourself what limits are now available to you.

You certainly appear to be on top of the situation and that is good.  As soon as you have received comps regarding your insurance needs, take it to the kitchen table and make your decision.  It is what it is and unfortunately, no one is watching the backs of the American people.  Shameful as it is.  Make sure you understand what the loan servicer on behalf of their investor is requiring so that you can ask for an accurate quote.

Nice to hear from you.

JJ

Don’t forget to make sure that what they are requiring that it is within their right to do so.  I know you won’t forget.

Due to a mix-up with my lender JP Morgan Chase, my home was sent to foreclosure. The bank had applied my last 4 mortgage payments to pay for forced hazard insurance. The rate of the insurance was 4 times the going price. Despite the fact I never missed a mortgage payment I was days away from losing my home. My efforts to amend the problem there was nothing I could do. The bank agents were uninformed and offered no assistance. The facts are mind-numbing and I will not bore anyone with the details. I contacted a lawyer who very wisely said to get away from Chase ASAP and refinance with another bank. Fortunately a small local bank came to the rescue and allowed me to refinance (even with my credit being damaged by Chase). When this nightmare was over and took the time to write a seething letter to several people in JP Morgan Chase management. I was surprised when someone replied from customer relations with a letter of apology for all my inconvenience… They also included a $25. gift card for Barnes and Noble. There is no doubt in my mind that the intent was malicious, evil greed. Is anyone aware if there are any class action lawsuits against JP Morgan Chase?

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