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2.7 Force-Placed Insurance

Mortgage lenders routinely require homeowners to purchase property insurance to protect the lender’s interest in the home in case of fire or other casualty.90 Homeowners whose property is located in certain federally designated flood zones are also required to maintain flood insurance.91 The loan instruments92 will authorize the lender to purchase such insurance on behalf of the homeowner if the homeowner fails to present evidence of continuous coverage or if the coverage lapses during the term of the loan.93 This coverage is called force-placed, lender-placed, or collateral protection insurance.

Typically, servicers outsource the monitoring of loans for compliance with insurance requirements directly to the insurance company that also issues the force-placed insurance policy.94 The servicer will also reroute insurance-related calls and correspondence from borrowers directly to the insurer. As a result, the consumer does not realize that a third party is involved.

The insurer writes a master policy for the servicer or lender under which coverage for individual properties can be added, deleted, or modified. Typically, this type of coverage automatically springs into effect when the homeowner’s traditional insurance policy lapses. There will be no gap in coverage, but there may be a delay before the servicer realizes that the homeowner’s policy has expired and begins charging for the force-placed insurance. If there is such a delay, the notice sent to the homeowner may appear to back-date the policy and charge for force-placed insurance even though no damage occurred to the home during the time period covered.95

Master policies for force-placed insurance name the servicer or lender, not the borrower, as the insured. When an individual property is added to the master policy, the creditor pays the premium and then seeks reimbursement from the consumer. The cost of such insurance is almost always much higher than a standard homeowner’s insurance policy.96 Another problem is that such coverage is often “single interest” insurance, protecting only the lender in an amount limited to the loan balance or property value, whichever is lower.97 So the homeowner is left with no protection for their personal property.

The task of regulating homeowner’s insurance, including force-placed insurance, has primarily been a matter of state law, pursuant to the McCarran-Ferguson Act.98 While most force-placed insurance is sold by carriers subject to some government oversight of rates and policy forms, some is sold by surplus-lines insurers whose rates and policy forms are not subject to approval by state insurance regulators. Servicers may argue that claims challenging the cost of force-placed insurance are barred by the filed-rate doctrine,99 but several courts have rejected the argument.100

The high cost of force-placed insurance can drive borrowers into default or prevent borrowers who are already in arrears from catching up on missed payments.101 The placement of this insurance and the servicer’s efforts to obtain reimbursement from the consumer frequently lead to a huge increase in the homeowner’s monthly payments. As a result, the homeowner may be unable to make the new monthly payments in full (assuming proper notice has been given to the borrower102), may incur late-payment penalties or other fees, and may eventually face foreclosure.103 Even when the servicer acknowledges that the force-placed insurance is improper, borrowers may have difficulty getting the servicer to properly refund force-placed insurance premiums.104

Excessive insurance costs also harm mortgage guarantors and investors, including Fannie Mae, because foreclosure proceeds are diverted from principal and interest repayment in order to reimburse servicers for escrow expenses.105 Stated differently, even if a borrower fails to pay the force-placed insurance premiums, the servicer recovers the premiums from the owner of the loan (investor) who is responsible for paying servicer fees off the top of any foreclosure settlement.

In some cases, commissions are paid to affiliates of the servicer.106 Because the servicer makes the decision about which insurer to use, and because the servicer does not eventually have to pay for the premium, there is a built-in incentive for the servicer to select the insurer that pays the servicer, or its affiliates, the most in the form of kickbacks or other compensation. Servicers have been known to improperly force-place flood insurance or to obtain force-placed insurance coverage in an amount greater than the outstanding balance due on the mortgage107 or in excess of the property value.108

For flood insurance, the preemption provisions of the National Flood Insurance Act may severely limit homeowners’ ability to challenge these practices.109 One court has held that, based on federal preemption, all claims—both federal and state—are barred against the mortgage holder and the servicer.110 However, another court has held that the Act did not preempt a suit challenging conduct in administering policies, including unearned kickbacks and backdating of policies.111The mistakes of an independent third party, who falsely certified to the servicer that the property was in a flood zone, triggering the incorrect force-placing of the flood insurance, are not protected by the preemptive provisions of the National Flood Insurance Act, however.112 In one case, the court held that the proper measurement of flood insurance for a home equity line of credit should not be tied to the principal balance of the loan, but rather must consider the amount of credit actually being extended to the borrower.113

Unwinding the mortgage problems back to the initial placement of such insurance can often identify the point that the payment problems began for a homeowner. If the placement of the insurance was improper—the servicer had adequate proof of existing coverage,114 the servicer should have advanced funds from escrow to pay the borrower’s policy,115 or it was the servicer’s fault that the coverage lapsed116—then the homeowner may have a defense to the default and foreclosure.117

State attorneys general took a step toward reducing abuses by including restrictions on the use of force-placed insurance in their national settlement with the five largest mortgage servicers.118 Under the settlement, when a borrower who has been paying for a voluntary insurance policy via an escrow account stops making escrow payments, the servicer must advance the cost of the premiums for the voluntary policy instead of allowing the policy to lapse and replacing it with a more expensive force-placed policy. Under this rule, servicers are not allowed to use force-placed insurance unless an existing, voluntary policy is canceled for reasons other than nonpayment or unless the borrower fails to purchase a policy. Although the settlement is no longer in effect, its servicing provisions are viewed as standard practice in the servicing industry. States have also taken other actions against servicers for insurance-related misconduct.119

The Dodd-Frank Act also addresses force-placed insurance by adding several protections to RESPA. As amended, RESPA requires servicers to give borrowers proper notice before force-placing insurance, to cancel such insurance when the borrower obtains their own policy, and to refund any charges for force-placed insurance assessed for periods when both policies were in effect. These changes and the implementing regulations issued by the Consumer Financial Protection Bureau are discussed in § 3.6, infra.

Claims for wrongful force-placed insurance include:120

  • • State statutory law protections;121
  • • State UDAP claims;122
  • • Breach of fiduciary duty;123
  • • Breach of contract;124
  • • Breach of the implied duty of good faith and fair dealing;125
  • • Unjust enrichment;126
  • • Tortious inference with business relationship;127
  • • RESPA;128 and
  • • TILA.129

As a result of several large class action settlements,130 borrowers may be barred from bringing some or all of these claims individually.131 Advocates should research and review the numerous force-placed insurance settlements to determine whether borrowers have viable claims.132

Footnotes

  • 90 {88} The typical mortgage language gives broad discretion to lenders to determine what hazard insurance is required. For example, the Fannie Mae/Freddie Mac uniform instruments include the following language:

    Property Insurance. Borrower shall keep the improvements now existing or hereafter erected on the Property insured against loss by fire, hazards included within the term “extended coverage,” and any other hazards including, but not limited to, earthquakes and floods, for which Lender requires insurance. . . . If Borrower fails to maintain any of the coverages described above, Lender may obtain insurance coverage, at Lender’s option and Borrower’s expense. Lender is under no obligation to purchase any particular type or amount of coverage. Therefore, such coverage shall cover Lender, but might or might not protect Borrower, Borrower’s equity in the Property, or the contents of the Property, against any risk, hazard or liability and might provide greater or lesser coverage than was previously in effect. Borrower acknowledges that the cost of the insurance coverage so obtained might significantly exceed the cost of insurance that Borrower could have obtained. Any amounts disbursed by Lender under this Section 5 shall become additional debt of Borrower secured by this Security Instrument. These amounts shall bear interest at the Note rate from the date of disbursement and shall be payable, with such interest, upon notice from Lender to Borrower requesting payment.

    Fannie Mae/Freddie Mac Uniform Instruments, First Lien Security Instrument ¶ 7 (Jan. 2001). See Curtis v. Cenlar Fed. Sav. Bank, 654 Fed. Appx. 17 (2d Cir. 2016) (dismissing borrower’s breach-of-contract claim based on lender’s requirement that he insure the property against wind damage).

  • 91 {89} See National Consumer Law Center, Mortgage Lending § 7.7 (3d ed. 2019), updated at www.nclc.org/library.

  • 92 {90} However, careful review of the contract is necessary, as the force-placed insurance language may vary from the Fannie Mae/Freddie Mac uniform instruments. See Gustafson v. BAC Home Loans Servicing, L.P., 294 F.R.D. 529 (C.D. Cal. 2013) (denying nationwide force-placed insurance class and noting at least five variations of language related to force-placed insurance).

  • 93 {91} While the contractual language permits a servicer or lender to force-place insurance, standing alone, it does not impose a duty on the servicer or lender to procure insurance in the event borrowers allow their policies to lapse. See, e.g., Whitfield v. Countrywide Home Loans, Inc., 252 Fed. Appx. 654 (5th Cir. 2007); In re Riccitelli, 14 Fed. Appx. 57 (2d Cir. 2001); Caplen v. Sec. Nat’l Servicing Corp., Inc., 514 F. Supp. 2d 746 (E.D. Pa. 2007); In re Williams, 360 B.R. 99 (Bankr. W.D. Pa. 2007); Tincher v. Greencastle Fed. Sav. Bank, 580 N.E.2d 268 (Ind. 1991); Paternostro v. Wells Fargo Home Mortg., Inc., 30 So. 3d 45 (La. Ct. App. 2009).

  • 94 {92} See Decambaliza v. QBE Holdings, Inc., 2013 WL 5777294 (W.D. Wis. Oct. 25, 2013) (describing industry and practices).

  • 95 See McNeary-Calloway v. JP Morgan Chase Bank, 863 F. Supp. 2d 928 (N.D. Cal. 2012) (alleging servicer improperly backdated policy to collect premiums for periods that had already passed). But see Cohen v. American Sec. Ins. Co., 735 F.3d 601 (11th Cir. 2013) (stating that backdating of policy was necessary to ensure continuous coverage); Purifoy v. Walter Invest. Mgmt. Corp., 2015 WL 9450621 (S.D.N.Y. Dec. 22, 2015) (same).

  • 96 See Williams v. Wells Fargo Bank, 280 F.R.D. 665 (S.D. Fla. 2012) (noting that insurer established premiums by simply adding 20% to the rates of another insurance company); Jeff Horwitz, Banks Face Thicket of Force-Placed Threats, Am. Banker, Jan. 18, 2012; Jeff Horwitz, Ties to Insurers Could Land Mortgage Servicers in More Troubles, Am. Banker, Nov. 9, 2010.

  • 97 {93} See Conquest v. WMC Mortg. Corp., 247 F. Supp. 3d 618 (E.D. Pa. 2017) (dismissing all claims in which loss payee on force-placed insurance was mortgagee; after loss, insurance proceeds paid to mortgagee and credited to loan); Caplen v. Sec. Nat’l Servicing Corp., Inc., 514 F. Supp. 2d 746 (E.D. Pa. 2007) (force-placed insurance for benefit of lender not borrower), aff’d, 343 Fed. Appx. 833 (3d Cir. 2009). See also Williams v. Certain Underwriters at Lloyd’s of London, 398 Fed. Appx. 44 (5th Cir. 2010) (borrower did not have standing to sue insurer to recover for wind and flood damages under force-placed insurance policy); Edwads v. Homeq Servicing Corp., 2008 WL 544180 (E.D. La. Feb. 25, 2008) (force-placed flood insurance protects lenders’ interests not those of borrowers); In re Akers, 445 B.R. 1 (Bankr. D. Col. 2011) (force-placed insurance policy procured for the mutual benefit of lender and borrower; however, lender had no duty to maximize recovery for borrower), aff’d on other grounds, 485 B.R. 479 (D.D.C. 2012).

    Some insurers may offer dual-interest policies issued to the borrower and containing a standard mortgage clause in favor of the lender. In such cases, coverage may extend beyond the loan balance up to the replacement value of the home. Unlike regular homeowner’s insurance, force-placed insurance also does not generally cover the contents of the home or liability for personal injury occurring on the property.

  • 98 {95} 15 U.S.C. §§ 1011 through 1015.

    In March 2013, the New York State Department of Financial Services settled an investigation of Assurant, Inc., the country’s largest force-placed insurer. The settlement included restitution to homeowners, a $14 million penalty, and reforms intended to reduce force-placed insurance rates. See New York Dep’t of Fin. Services, Press Release, Cuomo Administration Settles with Country’s Largest Force-Placed Insurer (Mar. 21, 2013), available at www.dfs.ny.gov.

  • 99 {96} The filed-rate doctrine generally prohibits challenges to an insurer’s rates that have been approved by a government regulating entity.

  • 100 {97} See Alston v. Countrywide Fin. Corp., 585 F.3d 753 (3d Cir. 2009); Longest v. Green Tree Servicing, L.L.C., 74 F. Supp. 3d 1289 (C.D. Cal. 2015); Santos v. Carrington Mortg. Services, L.L.C., 2015 WL 4162442 (D.N.J. July 8, 2015); Hoover v. HSBC Mortg. Corp., 9 F. Supp. 3d 223 (N.D.N.Y. 2014); Leghorn v. Wells Fargo Bank, 950 F. Supp. 2d 1093 (N.D. Cal. 2013); Cannon v. Wells Fargo Bank, 917 F. Supp. 2d 1025 (N.D. Cal. 2013); Ellsworth v. U.S. Bank, 908 F. Supp. 2d 1063 (N.D. Cal. 2012); Kunzelmann v. Wells Fargo Bank, 2012 WL 2003337 (S.D. Fla. June 4, 2012); Abels v. JPMorgan Chase Bank, 678 F. Supp. 2d 1273 (S.D. Fla. 2009); Stevens v. Citigroup, Inc., 2000 WL 1848593 (E.D. Pa. Dec. 15, 2000); Am. Bankers Ins. Co. of Fl. v. Alexander, 818 So. 2d 1073 (Miss. 2001) (filed-rate doctrine not bar to plaintiff claims that lender overcharged for force-placed insurance), overruled on other grounds by Capital City Ins. Co. v. G.B. “Boots” Smith Corp., 889 So. 2d 505 (Miss. 2004). But see Rothstein v. Balboa Ins. Co., 794 F.3d 256 (2d Cir. 2015) (challenge to force-placed insurance rates barred by filed-rate doctrine); Alpert v. Nationstar Mortg., L.L.C., 243 F. Supp. 3d 1176 (W.D. Wash. 2017) (allegations of force-placed insurance kickbacks barred by filed-rate doctrine); Fowler v. Caliber Home Loans, Inc., 277 F. Supp. 3d 1324 (S.D. Fla. 2016), appeal filed, 2016 WL 4761838 (11th Cir. Oct. 14, 2016).

  • 101 {98} See Fannie Mae Servicing Guide Announcement SVC-2012-04 (Mar. 14, 2012) (“the cost of lender-placed policies may impact the borrowers’ ability to reinstate their delinquent mortgage loans”); Jeff Horwitz, Ties to Insurers Could Land Mortgage Servicers in More Troubles, Am. Banker, Nov. 9, 2010. See also Fannie Mae Single-Family Servicing Guide, at B-6-01 Lender-Placed Insurance Requirements (Oct. 14, 2015), available at www.fanniemae.com.

  • 102 The Fannie Mae/Freddie Mac uniform instruments provide that force-placed insurance costs are payable by the borrower, with interest, but only “upon notice from Lender to Borrower requesting payment.” Fannie Mae/Freddie Mac Uniform Instrument ¶ 5 (Jan. 2001). See 11 U.S.C. § 2605(k).

  • 103 {100} See, e.g., In re Cothern, 422 B.R. 494 (Bankr. N.D. Miss. 2010) (servicer’s unrelenting and improper efforts to collect premiums for force-placed insurance drove borrowers into bankruptcy); Beneficial Fin. I, Inc. v. Windham, 847 S.E.2d 793 (S.C. Ct. App. 2020) (affirming award of summary judgment to borrower on UDAP claim that servicer wrongly imposed force-placed insurance, thereby driving up his payment and contributing to borrower’s default).

  • 104 {101} See, e g., Gomez v. Nationstar Mortg., L.L.C., 2015 WL 966224 (E.D. Cal. Mar. 4, 2015) (denying motion to dismiss numerous claims after servicer improperly force-placed insurance and then failed to correct the accounting and instead foreclosed); Narvaez v. Wilshire Credit Corp., 757 F. Supp. 2d 621 (N.D. Tex. 2010) (denying servicer’s summary judgment motion when borrower alleged that servicer failed to properly refund premiums).

  • 105 {102} See Jeff Horwitz, Fannie Seizing Control of Force-Placed Insurance from Banks, Am. Banker, Mar. 6, 2012 (discussing impact on investors and guarantors).

  • 106 {103} See Abels v. JPMorgan Chase Bank, 678 F. Supp. 2d 1273 (S.D. Fla. 2009) (breach of implied covenant of fair dealing sufficiently pleaded when lender purchased force-placed insurance from affiliate at excessive rate). But see Cohen v. Am. Sec. Ins. Co., 735 F.3d 601 (7th Cir. 2013) (commission to affiliate did not constitute kickback or unfair practice).

  • 107 {105} See Kolbe v. BAC Home Loans Servicing, L.P., 738 F.3d 432 (1st Cir. 2013) (requiring excess flood insurance did not breach contract or implied covenant of good faith and fair dealing) (en banc, 3–3 split); Swain v. Wells Fargo Bank, 54 F. Supp. 3d 850 (N.D. Ohio 2014) (dismissing borrower’s claims even though servicer required replacement flood insurance coverage well in excess of mortgage amount); Tinsley v. OneWest Bank, 4 F. Supp. 3d 805 (S.D. W. Va. 2014) (breach-of-contract claim stated when borrower alleged mortgagee required excess flood insurance); Hayes v. Wells Fargo Home Mortg., 2006 WL 3193743 (E.D. La. Oct. 31, 2006) (mortgage assignee permitted under contract to unilaterally require increase in amount of flood insurance coverage to value of property rather than amount of outstanding loan balance). See also 42 U.S.C. § 4012a(e) (amount of insurance coverage must be “at least equal to the lesser of the outstanding balance of the designated loan or the maximum limit of coverage available for the particular type of property, whichever is less”).

  • 108 {106} Alpert v. Nationstar Mortg., L.L.C., 243 F. Supp. 3d 1176 (W.D. Wash. 2017) (denying motion to dismiss UDAP claim based on alleged intentional overvaluation of property to garner higher premium).

  • 109 {107} Furthermore, courts have held that borrowers have no private right of action against mortgage lenders or servicers under the National Flood Insurance Act. See, e.g., Wentwood Woodside I, L.P. v. GMAC Commercial Mortg. Corp., 419 F.3d 310 (5th Cir. 2005); Arvai v. First Fed. Sav. & Loan Ass’n of S. Holland, 737 F.2d 638, 642 (7th Cir. 1984) (“Congress specifically placed the responsibility of administering and enforcing those aspects of the Flood Program dealing with mortgage lenders with those federal agencies which supervise the lenders”).

    Courts have routinely denied homeowners’ claims based upon the failure of mortgage lenders to require flood insurance or to notify borrowers that their property is located in a covered flood zone in accordance with National Flood Insurance Act. See, e.g., Hofbauer v. Northwestern Nat’l Bank of Rochester, Minn., 700 F.2d 1197 (8th Cir. 1983); Nicholson v. Countrywide Home Loans, 2008 WL 731032 (N.D. Ohio Mar. 17, 2008); Callahan v. Countrywide Home Loans, Inc., 2006 WL 2993178 (N.D. Fla. Oct. 20, 2006); In re Schweizer, 354 B.R. 272 (Bankr. D. Idaho 2006).

  • 110 Clark v. AmSouth Mortg. Co., 474 F. Supp. 2d 1249 (M.D. Ala. 2007) (National Flood Insurance Act expressly provides that mortgage holder and servicer can rely on and cannot be liable for properly guaranteed determination of need for flood insurance).

  • 111 {109} Degutis v. Fin. Freedom, L.L.C., 978 F. Supp. 2d 1243 (M.D. Fla. 2013).

  • 112 {110} Id.

  • 113 {111} Hofstetter v. Chase Home Fin., L.L.C., 2010 WL 3259773 (N.D. Cal. Aug. 16, 2010).

  • 114 {112} See Miller v. Wells Fargo Bank, 994 F. Supp. 2d 542 (S.D.N.Y. 2014) (breach-of-contract claim stated when borrower alleged he had required insurance, notified servicer, but servicer refused to remove force-placed insurance charges); Henderson v. Wells Fargo Bank, 974 F. Supp. 2d 993 (N.D. Tex. 2013) (alleging that servicer failed to acknowledge receipt of proof of insurance sent twice or explain why insurance coverage was insufficient or unacceptable).

    The borrower’s failure to provide adequate proof of existing coverage upon request of the servicer, including a proper loss-payee or mortgagee clause, will likely insulate the servicer from claims related to the placement of force-placed insurance. See Caplen v. SN Servicing Corp., 343 Fed. Appx. 833 (3d Cir. 2009) (lender authorized to force-place insurance in the absence of proof of insurance from the borrower even though condo was insured through master insurance policy); Hernandez v. Servis One, Inc., 2017 WL 2644641 (E.D. Tex. June 20, 2017) (failure to provide compliant policy with correct loss-payee precluded breach-of-contract claim for months in which policy was noncompliant); Webb v. Chase Manhattan Mortg. Corp., 2008 WL 2230696 (S.D. Ohio May 28, 2008) (finding servicer not liable because it took reasonable measures to obtain current insurance information from borrower, even though servicer’s predecessor in interest failed to pay insurance premium from escrowed funds); Mills v. Equicredit Corp., 344 F. Supp. 2d 1071 (E.D. Mich. 2004) (dismissing breach-of-contract claim for wrongly placing homeowner insurance on property when borrowers failed to ensure that servicer received borrower’s proof of insurance), aff’d on other grounds, 172 Fed. Appx. 652 (6th Cir. 2006).

  • 115 {113} Reg. X, 12 C.F.R. § 1024.17(k)(1), (2); § 3.6.5, infra.

  • 116 {114} The servicer may be at fault for the coverage lapse when, for example, the servicer maintained an escrow account for the payment or renewal of the homeowner’s insurance policy but failed to make the required payments. See Bilek v. Am. Home Mortg. Servicing, Inc., 2010 WL 2836976 (N.D. Ill. July 15, 2010) (denying servicer’s motion to dismiss when plaintiffs alleged that servicer maintained an escrow account for the purposes of paying taxes and insurance); U.S. Bank v. James, 2009 WL 2448578 (D. Me. Aug. 9, 2009), adopted, 2009 WL 2753868 (D. Me. Aug. 26, 2009); Smith v. GMAC Mortg. Corp., 2007 WL 2593148 (W.D.N.C. Sept. 5, 2007); Booker v. Wash. Mut. Bank, 2007 WL 475330 (M.D.N.C. Feb. 9, 2007) (servicer disbursed $800 from homeowner’s escrow account to pay property taxes on land other than plaintiff’s, failed to pay property insurance bill, then purchased and charged homeowners for much more expensive force-placed insurance). See also Hyderi v. Wash. Mut. Bank, 235 F.R.D. 390 (N.D. Ill. 2006) (challenging servicer’s policy of not paying insurance bills out of escrow unless it received bill from insurer; class certification denied); In re Ocwen Mortg. Servicing Litig., 2006 WL 794739 (N.D. Ill. Mar. 22, 2006) (numerous complaints filed alleging, inter alia, wrongful placement of force-placed insurance), aff’d, 491 F.3d 638 (7th Cir. 2007); Vician v. Wells Fargo Home Mortg., 2006 WL 694740 (N.D. Ind. Mar. 16, 2006) (denying servicer’s motion to dismiss claims for breach of contract, breach of fiduciary duty, unjust enrichment, and violations of state UDAP statute and TILA, based on allegations of improper force-placed insurance); Dowling v. Select Portfolio Servicing, Inc., 2006 WL 571895 (S.D. Ohio Mar. 7, 2006) (denying servicer’s motion to dismiss RICO and fraud claims when servicer improperly force-placed insurance on homeowners’ property, then attempted to collect cost of premiums, and eventually initiated foreclosure proceedings); Barbera v. WMC Mortg. Corp., 2006 WL 167632 (N.D. Cal. Jan. 19, 2006) (dismissing TILA and RESPA claims as time-barred and remanding state claims to state court when servicer, among other things, initially ignored homeowner’s proof of insurance and then failed to credit homeowner’s account for premium charges during period of overlapping coverage); Johnson v. HomeEq Servicing Corp., 2005 WL 2899632 (Ky. Ct. App. Nov. 4, 2005) (lender, by force-placing insurance, waived right to claim homeowner was in default for failure to obtain insurance).

  • 117 {115} Advocates should be aware that certain claims, including improper force-placed insurance, asserted against Fairbanks Capital Corp., a.k.a., Select Portfolio Servicing, may be precluded by the class settlement in Curry v. Fairbanks Capital Corp., No. 03-1095 (D. Mass. 2003). See, e.g., Dowling v. Select Portfolio Servicing, Inc., 2007 WL 928639 (S.D. Ohio Mar. 27, 2007).

  • 118 {116} See § 6.7.8, infra.

  • 119 See, e.g., Press Release, AG Healey Secures $2 Million in Restitution for 20,000 Massachusetts Homeowners from National Mortgage Servicer (Mar. 29, 2019) (settlement with Ocwen for unnecessary fees and overpriced force-placed insurance), available at https://web.archive.org.

  • 120 {117} But see Shilke v. Wachovia Mortg., 820 F. Supp. 2d 825 (N.D. Ill. 2011) (finding all borrower’s claims based on force-placed insurance preempted), aff’d on other grounds sub nom. Cohen v. Am. Sec. Ins. Co., 735 F.3d 601 (7th Cir. 2013). See generally § 11.11, infra (detailed discussion of preemption of servicing claims).

  • 121 {118} Some states have specific protections applicable to consumers for force-placed insurance, which provide proscriptions regarding placement, cost, payment of premiums, and occasionally private rights of action. See, e.g., W. Va. Code § 46A-3-109a.

  • 122 {119} See Alpert v. Nationstar Mortg., L.L.C., 243 F. Supp. 3d 1176 (W.D. Wash. 2017) (denying motion to dismiss UDAP claim based on alleged intentional overvaluation of property to garner higher premium); Martorella v. Deutsche Nat’l Trust Co., 161 F. Supp. 3d 1209 (S.D. Fla. 2015) (borrowers stated claim under Florida UDAP statute); Longest v. Green Tree Servicing, L.L.C., 74 F. Supp. 3d 1289 (C.D. Cal. 2015) (borrowers stated claim under “unfair” prong of California’s UDAP law); Hoover v. HSBC Mortg. Corp., 9 F. Supp. 3d 223 (N.D.N.Y. 2014) (borrowers stated claim under New York UDAP statute); Tinsley v. OneWest Bank, 4 F. Supp. 3d 805 (S.D. W. Va. 2014); Degutis v. Fin. Freedom, L.L.C., 978 F. Supp. 2d 1243 (M.D. Fla. 2013) (borrower allegations related to kickbacks and backdating policies stated claim under Florida UDAP statute); Ellsworth v. U.S. Bank, 908 F. Supp. 2d 1063 (N.D. Cal. 2012) (borrower stated UDAP claim under California law); McNeary-Calloway v. JP Morgan Chase Bank, 863 F. Supp. 2d 928 (N.D. Cal. 2012) (denying motion to dismiss state UDAP claim). See also National Consumer Law Center, Unfair and Deceptive Acts and Practices § 9.5.10 (9th ed. 2016), updated at www.nclc.org/library. But see Cohen v. Am. Sec. Ins. Co., 735 F.3d 601 (7th Cir. 2013) (borrowers failed to state a claim under Illinois UDAP statute); Booker v. Wash. Mut. Bank, 2007 WL 475330 (M.D.N.C. Feb. 9, 2007) (statutory violations need to be pleaded with particularity; breaches of contract are not grounds for state UDAP claim).

  • 123 {120} See Montoya v. PNC Bank, 94 F. Supp. 3d 1293 (S.D. Fla. 2015) (fiduciary relationship may be established notwithstanding state law limiting such relationship between a bank and obligor with respect to any extension of credit); Hoover v. HSBC Mortg. Corp., 9 F. Supp. 3d 223 (N.D.N.Y. 2014); Tinsley v. OneWest Bank, 4 F. Supp. 3d 805 (S.D. W. Va. 2014); Godon v. Chase Home Fin., L.L.C., 2012 WL 750608 (M.D. Fla. Mar. 7, 2012); Vician v. Wells Fargo Home Mortg., 2006 WL 694740 (N.D. Ind. Mar. 16, 2006); Am. Bankers Ins. Co. of Florida v. Alexander, 818 So. 2d 1073 (Miss. 2001) (lender and insurer owed fiduciary duty to borrowers to inform them of profit sharing related to forced-placed insurance), overruled on other grounds by Capital City Ins. Co. v. G.B. “Boots” Smith Corp., 889 So. 2d 505 (Miss. 2004); § 5.7, infra.

  • 124 {121} See Penton v. Centennial Bank, 2019 WL 6769661, at *2 (N.D. Fla. Nov. 22, 2019) (denying motion to dismiss allegation that bank breached mortgage agreement by charging premiums that included “unearned commissions” or “kickbacks” and bundled administrative costs); Longest v. Green Tree Servicing, L.L.C., 74 F. Supp. 3d 1289 (C.D. Cal. 2015); Santos v. Carrington Mortg. Services, L.L.C., 2015 WL 4162442 (D.N.J. July 8, 2015); Hoover v. HSBC Mortg. Corp., 9 F. Supp. 3d 223 (N.D.N.Y. 2014); Hamilton v. Suntrust Mortg Inc., 6 F. Supp. 3d 1312 (S.D. Fla. 2014); Ellsworth v. U.S. Bank, 908 F. Supp. 2d 1063 (N.D. Cal. 2012); Vician v. Wells Fargo Home Mortg., 2006 WL 694740 (N.D. Ind. Mar. 16, 2006); § 5.5, infra. But see Kolbe v. BAC Home Loans Servicing, L.P., 738 F.3d 432 (1st Cir. 2013).

  • 125 {122} See Penton v. Centennial Bank, 2019 WL 6769661, at *4 (N.D. Fla. Nov. 22, 2019) (“By alleging that Centennial misused its discretion in selecting insurance and assessing fees that contravened Penton’s expectations, Penton has stated a claim for breach of the implied covenant of good faith and fair dealing.”); Longest v. Green Tree Servicing, L.L.C., 74 F. Supp. 3d 1289 (C.D. Cal. 2015); Santos v. Carrington Mortg. Services, L.L.C., 2015 WL 4162442 (D.N.J. July 8, 2015); Hoover v. HSBC Mortg. Corp., 9 F. Supp. 3d 223 (N.D.N.Y. 2014); Hamilton v. Suntrust Mortg Inc., 6 F. Supp. 3d 1312 (S.D. Fla. 2014); Ellsworth v. U.S. Bank, 908 F. Supp. 2d 1063 (N.D. Cal. 2012); McNeary-Calloway v. JP Morgan Chase Bank, 863 F. Supp. 2d 928 (N.D. Cal. 2012); Williams v. Wells Fargo Bank, 280 F.R.D. 665 (S.D. Fla. 2012) (granting class certification); Abels v. JPMorgan Chase Bank, 678 F. Supp. 2d 1273 (S.D. Fla. 2009) (denying motion to dismiss claim for breach of implied covenant of good faith and fair dealing when borrowers alleged impermissible self-dealing by lender that purchased insurance from one of its affiliates at excessive rates). But see Feaz v. Wells Fargo Bank, 745 F.3d 1098 (11th Cir. 2014) (contract provision granting lender right to place insurance in its “sole discretion” precluded claim for good faith and fair dealing under Alabama law); Kolbe v. BAC Home Loans Servicing, L.P., 738 F.3d 432 (1st Cir. 2013); LaCroix v. U.S. Bank, 2012 WL 2357602 (D. Minn. June 20, 2012) (granting motion to dismiss good faith and fair dealing claim when borrower alleged that force-placed insurance was worthless, backdated, and excessive, and that servicer received kickbacks and misrepresented flood insurance requirements).

  • 126 {123} See Lass v. Bank of Am., 695 F.3d 129 (1st Cir. 2012) (reversing dismissal of unjust enrichment claim arising from mortgagee’s forced placement of insurance); Longest v. Green Tree Servicing, L.L.C., 74 F. Supp. 3d 1289 (C.D. Cal. 2015); Hamilton v. Suntrust Mortg. Inc., 6 F. Supp. 3d 1312 (S.D. Fla. 2014) (borrower stated claim against force-placed insurance insurer for unjust enrichment); Casey v. Citibank, 915 F. Supp. 2d 255 (N.D.N.Y. 2013) (denying mortgagee’s motion to dismiss borrower’s unjust enrichment claim arising from mortgagee’s alleged practice of force-placing flood insurance in order to collect kickbacks and commissions); Ellsworth v. U.S. Bank, 908 F. Supp. 2d 1063 (N.D. Cal. 2012) (refusing to dismiss restitution claim arising from alleged kickbacks paid by insurer to plaintiff’s mortgagee for force-placing flood insurance on plaintiff’s property); McNeary-Calloway v. JP Morgan Chase Bank, 863 F. Supp. 2d 928 (N.D. Cal. 2012) (refusing to dismiss claim of borrowers that mortgagees unjustly charged them for back-dated force-placed insurance policies in order to obtain commissions and kickbacks); Williams v. Wells Fargo Bank, 280 F.R.D. 665 (S.D. Fla. 2012) (granting class certification).

  • 127 {124} See Hamilton v. Suntrust Mortg. Inc., 6 F. Supp. 3d 1312 (S.D. Fla. 2014) (borrower stated claim against force-placed insurance insurer for tortious interference).

  • 128 {125} See § 3.6, infra.

  • 129 {126} Several courts have held that a servicer’s actions in placing unauthorized insurance and then charging borrower’s account for such insurance may trigger new disclosures under section 1026.18 of Regulation Z. See Santos v. Carrington Mortg. Services, L.L.C., 2015 WL 4162442 (D.N.J. July 8, 2015); Cannon v. Wells Fargo Bank, 917 F. Supp. 2d 1025 (N.D. Cal. 2013); Vician v. Wells Fargo Home Mortg., 2006 WL 694740 (N.D. Ind. Mar. 16, 2006); Travis v. Boulevard Bank, 880 F. Supp. 1226, 1230 (N.D. Ill. 1995). See also National Consumer Law Center, Truth in Lending § 3.9.4.5 (10th ed. 2019), updated at www.nclc.org/library.

  • 130 {127} See, e.g., Lee v. Ocwen Loan Servicing, L.L.C., 2015 WL 5449813 (S.D. Fla. Sept. 14, 2015) (approving class settlement).

  • 131 {128} See McKinstry-Austin v. JP Morgan Chase Bank, 2015 WL 5591106 (E.D. Mich. Sept. 22, 2015) (applying res judicata to borrower’s claims based on previous class settlement).

  • 132 {129} National Consumer Law Center, Force-Placed Insurance Settlements (June 1, 2017).