Kohn, Swift & Graf is launching investigations into homeowner claims against Quicken Loans and other financial institutions concerning force-placed insurance policies ordered by these companies. Force-placed insurance refers to an insurance policy placed by a lender, bank or loan servicer on a home in the event that the property owners’ own insurance is cancelled, has lapsed or is deemed insufficient and the borrower does not secure a replacement policy. This practice is also referred to as lender-placed, creditor-placed, or collateral protection insurance.
Force-placed insurance offers more security to the lender’s investment in the property, however the homeowner remains responsible for paying the premium. Usually the expense of these policies is substantially greater than what you can obtain by shopping for an insurance policy yourself. In addition, the lender-placed insurance policy may have limited or duplicative coverage. For instance, these policies generally do not cover personal items or owner liability.
It has been reported that financial institutions have been working with insurance providers to share the premiums from these policies with the institutions’ subsidiaries. In many cases, the payments are illegal and considered kickbacks.
Banks currently under investigation for this practice include:
Capital One Financial
It has been reported that at least one company, Quicken Loans, engaged in these predatory practices. It has further been alleged that the banks forced homeowners into unfair insurance purchases and that these banks are in violation of the homeowners’ mortgage contracts and other laws. Experts believe that several other banks are likely participating in the same unfair practices.
What Are Your Rights?
1) Your mortgage lender must notify you if it signs a policy on your home.
2) It may be possible to cancel the force-placed insurance policy and switch to an independent policy that meets the insurance requirements outlined by your lender. You are entitled to any unused portion of the premium on the force-placed policy.
3) You can only be charged the actual cost of the insurance, so if you are billed any additional fees, you should take action immediately. Your mortgage lender should NEVER receive any financial benefit from force-placed insurance.
If you believe anything improper occurred or you have any questions about force-placed policies, particularly one involving Quicken Loans or any of the above-listed lenders, please contact us to discuss your claim.
It has also been reported that lenders are not making escrow payments in a timely manner to insurance companies. If you have experienced such practices, please contact us to discuss your claim.