Feds Look to Deep-Six 'Forced' Home Insurance
Banks benefit from practice that has gouged millions
By Matt Cantor, Newser User
Posted Mar 26, 2013 12:11 PM CDT
In this Thursday, Jan. 3, 2013, photo, a home is for sale in Mount Lebanon, Pa.   (AP Photo/Gene J. Puskar)

(Newser) – Since 2009, some six million "force-placed" home insurance policies have been written—expensive policies that hit homeowners if their original plans fall through, for instance, because they've fallen behind on payments. But these "forced" policies can cost up to 10 times as much as the original plans, and homeowners who've dropped their initial policies often don't realize what they're getting themselves into—though they can opt to replace the forced policies with plans they've picked. Now, federal regulators are looking to ease the forced-policy burden, the Wall Street Journal reports.

Insurance companies pay banks fees and commissions on the forced policies, a practice that some say encourages banks to establish overly expensive policies in the first place. Some banks also receive a share of $2.6 billion in premiums from the policies. In a filing today, the Federal Housing Finance Agency will call for a ban on those fees. The move, which would apply to all Fannie Mae- or Freddie Mac-backed mortgages—or half the housing market—could cut the prices of the policies, the Journal notes. The federal filing will be open for comment for 60 days, during which it could be amended.

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Showing 3 of 6 comments
saucier111
Mar 26, 2013 3:00 PM CDT
The GOP say's this is just free market interprise. A dishonest or crooked banker, tell me it's not so.
Devo74
Mar 26, 2013 1:47 PM CDT
why don't the banks start by forcing people to leave there homes that foreclose (Bankrupt) and that are still living in them under the taxes that people paid to bail out the banks it not fair to other homeowners that struggle to pay there monthly mortgage every month.....
MarkFL
Mar 26, 2013 12:38 PM CDT
Hmm... The government is requiring people to buy insurance so that everyone else is not stuck with the bill. What an interesting idea! Maybe I should have thought of that.