Saturday, March 17, 2012
Groups Step Up to Stop ‘Forced’ Homeowners Insurance
Home insurance policies are generally a requirement in order for borrowers to get a home loan, and for those home owners who let their policies lapse or don’t buy it on their own, mortgage companies can do it for them. The result is often pricey homeowners insurance that home owners are then billed for.
Federal and state officials are becoming increasingly concerned about the high cost of these “force-placed insurance” policies, The Wall Street Journal reports.
The Consumer Financial Protection Bureau recently announced that it plans to 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.”
Fannie Mae is also cracking down on these forced policies because it says that this type of coverage is usually much more expensive and makes it tougher for home owners to afford their payments. If the home owner falls into foreclosure, Fannie Mae then gets stuck with the bill.
“Fannie Mae said it would solicit proposals from insurance companies seeking to compete for its force-placed business,” The Wall Street Journal reports. “If it ultimately decides to do so, it would be a departure from current practice, in which lenders manage their own business relationship with force-placed insurance providers.” Read More...