Banks Probed For Allegedly Steering Homeowners Into More Expensive Insurance

Let's say you're a homeowner facing tough times. You're starting to fall behind on your home insurance payments, but then, your bank steps in and buys an insurance policy on your behalf. Good news, right? Not if your bank steers you into a policy that's 10 times more expensive than your previous one.

This practice, known as forced-place insurance, is the subject of a probe by New York State's Department of Financial Services into some of the country's biggest banks, according to reports in The New York Times and Reuters. The inquiry, which is already underway, has implicated a number of major financial firms, including JPMorgan Chase, Wells Fargo, Citigroup and Bank of America.

The stories of banks making costly, potentially destructive decisions on behalf of homeowners come as millions of Americans are already trying to cope with diminished wealth due to a weak housing market, which many allege was caused in part by banks and lenders pushing risky loans on homeowners.

Such allegations also recall earlier claims of reverse redlining, in which mortgage servicers systematically preyed on black homeowners and other minorities. Bank of America recently agreed to pay $335 million to settle claims of such discrimination by Countrywide Financial.

With recent natural disasters sending the costs of home insurance premiums higher -- and the seemingly endless queue of foreclosure cases likely to keep home prices depressed for at least another year -- homeowners were already facing a plethora of bad news before the prevalence of forced-place insurance started to become clear last fall, with a feature in the trade newspaper American Banker.

That item made it clear how much banks stand to benefit from guiding homeowners into more expensive insurance policies. In one instance, the Florida-based EverBank allegedly allowed a homeowner's $4,000 policy to lapse, then replaced it with a policy from the company Assurant that cost $33,000. In return for facilitating such a great deal, Assurant reportedly paid a $7,100 commission to an EverBank subsidiary.

Also on HuffPost:

Comments

[siegfried728711]

03:39 PM on 01/15/2012

these bankers should be in "Adult Movies doing what they do best...

[siegfried728711]

03:36 PM on 01/15/2012

I wonder if the officials of those banks have a tattoo south of the equator reading " crooks, yes we are,

[siegfried728711]

03:14 PM on 01/15/2012

that Boa constrictor of a bank( Boa) is always in the news.
now he has company and they are saying " Look, we're not the only one!!!

[Fred Lane]

09:27 AM on 01/13/2012

Deregulation, or the lack of regulation, always causes these type of events to happen, and with more frequency. Republicans call this capitalism and really don't want anything regulated. With greed and corruption running ever rampant these days, it seems that many things and industries require regulation, or at the ery least, some form of oversight. This is nothing new but we've allowed this to lieterally consume us the inside out and still have choosen to do absolutely nothing about it other than have water-cooler type conversations. I expect that we will continue to ignore the obvious, even while being driven into and in the ditch and mostly because when you follow the money, someone somewhere always gets rich and/or richer from our individual misfortune. Pretty sad that ultimately, we won't even save ourselves from ourselves...

[authorized-user]

08:46 AM on 01/13/2012

How many insurance companies have these bankers on their board of directors???

[siegfried728711]

03:16 PM on 01/15/2012

authorized, its a King size bed, to bad its not a water-bed, and then again, we're the only ones getting wet.....

[holyghost1]

05:49 PM on 01/12/2012

We, the people, were not the ones who changed or bent the rules with banks and other financial institutions. The fault lies squarely on their shoulders during the Bush administration because there was NO OVERSIGHT committee to investigate fraud...The GOP deregulation philosophy which would supposedly create job growth and lower unemployment is not only unmanageable(as we have seen), it is fraught with corruption by the very institutions and financiers who evidently are not satisfied with the million-billions they already have. Some of our wealthiest have to be babysat because they do not follow the very ideology that they purport to accomplish by having less government and more free enterprise--this is at the core an ethical issue as well as a philisophical one...

[valkyre]

12:22 AM on 01/13/2012

Well, pretty much... except it was a bipartisan GOP/Neo-Liberal deregulation philosophy, and we lost Glass-Steagal regulations preventing banks from gambling with FDIC insured deposits under Clinton, and Obama's justice dept. has actually prosecuted less cases of financial fraud then any president ever, even Bush, even with all the obvious instances of criminal fraud that lead to the crisis.

[holyghost1]

01:38 PM on 01/13/2012

I understand what you are saying--I'm not necessarily towing the Democratic line--all I want to say is that ALL governments are corrupt in one way or another. Bottom line, we have a duty to choose the lesser of two evils, and elect the president in 2012 who has a philosophy that takes into consideration the difficulties of the middle class AND those who are out on the streets...

[UtahSlim]

01:41 PM on 01/12/2012

Not unlike a doctor or hospital charging an uninsured patient ten times the amount for the same service. Somehow, businesses think it is OK to overcharge the poor or vulnerable. That's the 'free market' solution.

[pbr56]

01:54 PM on 01/12/2012

Ron Paul 2012?????????????????

[Wes Allen]

01:02 PM on 01/12/2012

Forced Placed coverage has a far more detrimental aspect than this article mentions. This very expensive coverage only covers the lenders interest in the dwelling. No personal property coverage, no liabilty coverage and no coverage for any equity that mind be in the house....( you do remember home equity )
Sometimes homeowners are placed into this coverage and they think , " oh,I have a new homeowners policy"...very sad that they just never realize the implications of this type of change.

[Rita Foster]

11:08 AM on 01/13/2012

Exactly. I know this from personal experience and I thought I was educated. They are slick and cunning these banks and insurance companies.

[siegfried728711]

03:18 PM on 01/15/2012

Rita, its a King-size bed, they all are in the same bed, to bad its not a water-bed, but, then again we're the only ones getting wet...

[George Costanza]

10:37 AM on 01/12/2012

This happens all the time. Even if you aren't behind on your insurance. We re-fi'd, and suddenly the bank "didn't have a record" of our insurance certificate. So, we called our carrier and had them send another one. The next month, they couldn't find it again, and sent us a nasty letter. So we contacted our carrier and sent the certificate again. The third month, they sent us a letter indicating that we failed to get insurance, and they were purchasing it for us.

We have a Cadillac plan, and the "insurance" the bank bought cost as much for a month as our actual insurance cost for a year. This is a scam, and they run it all the time.

In our case, we were able to work it out, but only because we do significant other business with the bank's investment arm, and our broker got involved in the case. Most people who don't have the kind of portfolio we have would have to hire a lawyer, and it would get ugly.

Banks suck. Go to a Credit Union.

[authorized-user]

08:48 AM on 01/13/2012

Time for a fire to test that policy.

[siegfried728711]

03:20 PM on 01/15/2012

OK George, just like kosher food, its all a scammmm

[RedDog79]

10:12 AM on 01/12/2012

why bother going after the big banks and insurance companies when you can sit back and do what the gop wants us to do - let the free mareket enterprise system take care of it. yeah right.
go get them NY!

[wyattc71]

10:04 AM on 01/12/2012

This issue has been beat to death in the past. However, I truly hope that this investigation will be indepth and root out the truth concerning force placed insurance and profits that are gleened by the insurance brokers, agents, banks, and servicers at the expense of homeowners. In short, this type of product bootstraps many homeowners into defaulting and an ultimate foreclosure action.

[Debs Lockwood]

08:52 AM on 01/12/2012

AGAIN> Deutsche Bank was left out- so was Archbay Holdings LLC ( also known as Archbay Capital) who is the Hedge Fund buying up foreclosures ( some of which they bought from banks like Deutsche Bank that never actually owned them to sell) They like Assurant .

[Eugene Berkovich]

08:37 AM on 01/12/2012

That's why we need Elizabeth Warren representing the consumer in US Senate. This is why we need some muscle behind government agencies that would represent our interests against the banks and the Big Business.

[big tom]

07:54 AM on 01/12/2012

bank crooks fear richard cordray... he will put them in prison... no prisoners . no appeals prison time is the only cure. go cordray

[big tom]

07:50 AM on 01/12/2012

looks like the american public is finally waking up to the magnitude of the corruption.from big banks