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HSBC to Pay Mass. Homeowners $2.7M Over Force-Placed Insurance Practices

insurancejournal.com | February 22, 2016

Massachusetts Attorney General Maura Healey said national mortgage lender and servicer HSBC has agreed to pay $4 million to resolve allegations involving force-placed insurance practices.

The settlement resolves allegations that HSBC received commissions and other “kickbacks” relating to force-placed insurance policies that it procured for struggling Massachusetts homeowners, Healey said.

Under the agreement filed Thursday, HSBC will provide $2.675 million in restitution to affected Massachusetts homeowners, and pay an additional $1.4 million to the Commonwealth of Massachusetts.

Healey said the settlement provides for refunds to thousands of Massachusetts borrowers who were improperly charged force-placed insurance premiums that included commissions or other payments to HSBC.

“Mortgage servicers should not enrich themselves through insurance products at the expense of struggling homeowners,” Healey said. “This agreement ensures that HSBC returns the money to Massachusetts consumers it received in violation of state laws.”

Force-placed insurance is property insurance that mortgage servicers obtain on behalf of homeowners when they believe homeowners have failed to maintain adequate homeowners insurance. Force-placement often occurs in circumstances in which a borrower has fallen behind on mortgage payments and other bills.

The attorney general’s office said mortgage servicers like HSBC often rely on force-placed insurance companies to monitor whether borrowers have maintained adequate homeowners coverage.

When a borrower is believed to have failed to maintain appropriate coverage, the insurer issues a force-placed policy and the mortgage servicer charges the premium for the policy to the homeowner.

Premiums for these force-placed policies are high, often as much as two- or three-times as expensive as voluntary insurance, and the coverage provided is limited, according Healey.

Until June 1, 2012, HSBC received compensation that was tied to the force-placed insurance premiums charged to HSBC’s borrowers, which the attorney general’s office alleges created an improper conflict of interest and violated state consumer protection laws.

An HSBC affiliate was allegedly paid commissions by the insurer Assurant Inc. for the sale of the force-placed policies despite the fact that HSBC’s affiliate did not perform any of the traditional functions of an insurance agent.

HSBC also participated in Assurant’s quota-share reinsurance program, which enabled its affiliate to share in the profits of Assurant’s highly lucrative force-placed insurance business, the attorney general’s office said.

Under the terms of the settlement, HSBC agreed not to accept commissions, profit-sharing, or reinsurance proceeds or any free or below market value services from insurers that it uses for force-placed policies on Massachusetts borrowers’ properties.

In November, an Assurant subsidiary entered into an agreement with the attorney general’s office to refund premiums to thousands of Massachusetts homeowners who were required to purchase unnecessary or overpriced force-placed insurance policies.

 

 

 

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CFLA was founded by the Nation's Leading Foreclosure Defense Attorneys back in 2007 to serve the Foreclosure Defense Industry and fight pervasive Bank Fraud. Since opening our virtual doors, CFLA has rapidly expanded to become the premier online legal destination for small businesses and consumers. But as the company continues to grow, we're careful to hold true to our original vision. For us, putting the law within reach of millions of people is more than just a novel idea—it's the founding principle, just ask Andrew P. Lehman, J.D.. With convenient locations in Houston and Los Angeles, you can contact Our National Account Specialist and General Manager / Member Damion W. Emholtz at 888-758-2352 for a free Mortgage Fraud Analysis or to obtain samples of work product, including cutting edge Bloomberg Securitization Audits, Litigation Support, Quiet Title Packages, and for more information about our Nationally Accredited and U.S. Department of Education Approved "Mortgage Securitization Analyst Training Certification" Classes (3 days) 24 hours for approved CLE & MCLE Credit (Now Available Online).

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