Force placed Insurance is attracting a lot of attention at the present time. Force placed or Lender placed Insurance is placed pursuant to a contractual power given to a Lender-Mortgagee by a Borrower-Mortgagor, the party agreeing to pay off a Mortgage. Execution of the power is often given to a Mortgage Servicer. By contract, the power can only be executed when the Borrower has defaulted on making her or his Homeowner's Premium payments as required by the loan documents.
Force placed Insurance is not a good deal for the Homeowner. The cost of the Premium is added to the monthly Mortgage payment which, in most if not all cases, the Homeowner has stopped making because the cost of the required Homeowner's Insurance is most often included in the monthly Mortgage payment from the beginning. When the Homeowner stops making the monthly Mortgage payment, she or he also thereby stops paying the required Homeowner's Insurance Premium too.
Premiums for force placed Insurance reportedly exceed standard Homeowner's Insurance Premiums by 2 to 10 times. This difference is not due to Claims history, however. Reportedly "losses on lender-placed policies amount to less than on standard policies." See Lisa Prevost, "The High Cost of 'Forced' Insurance" (New York Times Online, Thursday, October 4, 2012).
The Good Faith aspects of the contract power to force Insurance Premium payments on the Borrower-Homeowner are addressed in an article published on Insurance Claims and Bad Faith Law Blog on Sunday, October 7, 2012.
Readers of this blog have an opportunity to declare the public policy which will affect the outcome of how powers of force placed Insurance are exercised in the future. The Consumer Financial Protection Bureau has pursued and is pursuing seven of what it calls "rulemakings" with related requirements on this issue. Most of these "rulemakings" generally take effect on January 21, 2013 says the CFPB, but two have Comment Periods which close on Tuesday, October 9, 2012. Here are links to both and to hyperlink portals through which you can leave your Comments as you may wish: 2012 Truth in Lending Act (Regulation Z) Mortgage Servicing and although both relate to the issue, the more pertinent as between the two proposed regulations: 2012 Real Estate Settlement Procedures Act (Regulation X) Mortgage Servicing Proposal.
This is an opportunity to Comment and be heard on the public policy which will decide how force placed Insurance is regulated in the future.
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Posted by: mcx tips | March 04, 2013 at 06:39 AM