Many of those who have fallen behind on their mortgages and were unable to keep up with insurance payments had the banks “force place” insurance on their homes. While the bank does need to protect its investment in the home, the banks were making commissions from the insurance companies they were using to place insurance on the home. Further, the rates of insurance in a forced place insurance situation can be many times that of what the homeowner had in the first place. Florida represents 75% of the forced placed insurance market.
Because of this situation, many homeowners have fought back and sued the banks, leading to what appears to be a settlement on the way from banks such as Citibank, Wells Fargo, Bank of America, and HSBC Bank USA. Further, lenders such as Wells Fargo, perhaps in response to the negative coverage of forced placed insurance policies, has started a new program where the borrower can request that the bank advance the funds necessary to pay the homeowner’s preferred insurer. The homeowner, however, will then be required to pay this money back to the bank at some time, such as over the life of the home loan.
Further, banks such as Bank of America and Chase, are no longer earning commissions on forced place insurance policies in Florida.
Many homeowners should expect to have settlement checks on their way.