Miller & Miller Insurance Blog
Who's Pushing Homeowners off the Foreclosure Cliff?
Banks and their mortgage services strike arrangements with insurance companies in which the banks agree to buy high-priced policies on behalf of homeowners whose coverage has lapsed. The premiums are advanced to the insurer by the bank and a commission is paid to the bank by the insurer, which is priced into the premium. This makes the homeowner billed for the premium, commissions and all.
Some lenders’ actions have been imposing insurance policies, making them very unhelpful to the homeowners. The state regulators and the Consumer Financial Protection Bureau have brought their attention to the situation. Rules are being considered to help homeowners avoid unwarranted “forced-placed insurance.” It is thought that the U.S. should go further and limit commissions and fine any company that knowingly overcharges a homeowner, as well as require banks to seek competitive bid for force-placed insurance policies. States need to play a stronger role in bringing down rates because insurance is not regulated at the federal level. It is required for a homeowner paying mortgages to maintain insurance on their property. These requirements are meant to protect the property of the lender if a calamity were to occur.
Homeowners that have experienced coverage gaps have financial problems that lead to the result of not paying their insurance bills. This makes them at an even greater risk for foreclosure. It should not be allowed for the banks and insurers to add to the likelihood of default by artificially inflating the cost of insurance.