X

Feds Look to Deep-Six 'Forced' Home Insurance

Banks benefit from practice that has gouged millions
By Matt Cantor,  Newser Staff
Posted Mar 26, 2013 12:11 PM CDT
Feds Look to Deep-Six 'Forced' Home Insurance
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.

story continues below

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. (Read more housing market stories.)

We use cookies. By Clicking "OK" or any content on this site, you agree to allow cookies to be placed. Read more in our privacy policy.
Get the news faster.
Tap to install our app.
X
Install the Newser News app
in two easy steps:
1. Tap in your navigation bar.
2. Tap to Add to Home Screen.

X