American Bar Association publishes book presenting the evidence never before available except to the lawyers and their clients in cases that never went to trial.
"Lender Force-Placed Insurance Practices" tells the story of a real-life drama, the drama of how American homeownership became a business opportunity for everyone but homeowners. Lender force-placed insurance is not just for homes, however; it is a part of virtually every loan in the country.
We just may not be aware of it.
Lenders place insurance by force when a loan's collateral is in danger. Borrowers agree to provide collateral to guarantee that they will repay the loan. If the loan is for an automobile, then the automobile is the collateral; if the loan is a mortgage on a home, then the home is the collateral. In case of damage to the collateral, as a part of the loan the borrower pays for insurance to protect the collateral.
If the borrower does not pay the collateral protection insurance premiums, then as a part of the loan agreement the lender can place insurance by force to protect the collateral and the borrower will pay the premiums for the insurance force-placed by a lender. Those premiums are added to the monthly loan repayment. Borrowers agree that if they do not make the monthly payment, their lenders can foreclose on their homes or repossess their automobiles.
This is where the previously unpublicized, often unseen “lender force-placed insurance practices” come into play. These practices involve hidden charges like commissions paid to affiliates of the lender which are insurance agents in name only, or reinsurance premiums paid to subsidiaries of the lender. The insurance company providing the force-placed insurance pays these charges in order to get the business of force-placed insurance. The charges are silently added to the borrower’s monthly payment.
The facts presented here were learned in a forensic investigation into publicly available information over the course of 3 years. What I mean by “forensic investigation” refers to my examination of the evidence of LFPI practices, which I largely found in Court files. I concentrated on what the parties testified and what the documents displayed. I did not put much emphasis on what the attorneys argued in those cases.
My default rule was to rely on the testimony and documents that came from the most knowledgeable source on any given issue. Whenever the issue involved identifying and describing LFPI practices, and the evidence was available, those sources were the testimony and documents provided by the lenders and their affiliates and subsidiaries, by their mortgage servicers, and by the insurance companies which offer the force-placed insurance policies.
No case involving “Lender Force-Placed Insurance Practices” has ever gone to trial. The evidence is on display in this book and in the Court files of the cases which all came to an end without a trial.
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