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Monday, September 23, 2013

Consumer Advocates Urge Lender-Placed Insurance Reforms

Last week, eight consumer advocate groups urged the FHFA to reform Lender-Placed Insurance in order to "protect homeowners and taxpayers from costly force-placed insurance (FPI) abuses." In the join letter to Acting Director Ed DeMarco the groups asked the FHFA to consider the following reforms:
  • "Prohibit servicers from having any financial interest in the placement of FPI, other than the coverage provided by the insurance."
  • Allow the GSEs and investors "to directly purchase force-placed insurance (as well as title insurance and mortgage insurance)."
  • "If FHFA opts initially to continue the reimbursement approach, FHFA should set the reimbursements on the basis of the reasonable cost of providing FPI rather than seeking to identify specific unreasonable expenses."
  • "Limit retroactive charges."
  • "Require servicers to advance payment for existing insurance policies that are at risk of cancellation for non-payment – instead of buying force-placed insurance."
Read the letter.