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The controversial force-placed insurance coverage policy is a topic that has garnered the attention of the top insurance regulators. And now the attention on the subject is being elevated to a new level with a hearing being scheduled in Atlanta on August 9.
What is force placed insurance?
Force placed insurance is a policy that is a enacted by a bank or mortgage company when a homeowner falls behind on their original homeowner’s insurance policy, or when the homeowner’s insurance policy expires due to lack of payment. The bank will then, acting in its own best interest, place insurance on the home on the homeowner’s behalf.
The problem with this, as you might imagine, is that the force placed homeowner’s insurance policy is substantially more expensive than the original homeowner’s insurance policy. And with a rate hike in the insurance policy comes a substantial rate hike in the monthly mortgage payment amount that the homeowner now has to pay.
Force-placed insurance, which mortgage companies can purchase for homeowners when their policies lapse, is a “financial windfall” for Bank of America, according to a complaint filed yesterday in West Palm Beach.
“A substantial portion of the premiums are refunded to Bank of America or its affiliates and subsidiaries through various kickbacks, reinsurance and/or unwarranted commissions,” according to the homeowners, who seek to proceed on behalf of a U.S. borrowers who were charged for the insurance by Bank of America or an affiliate.
The force placed insurance topic is now set for a hearing that will take place right here in Atlanta on August 9th.
So what do you think about the idea of force placed insurance?