For Sale: A Nearly Nonexistent Insurance Agency
|By JEFF HORWITZ, Associated Press|
Only one thing justifies Harwood's nine-figure price tag: The ethereal company has long collected commissions on high-priced insurance that Nationstar compels otherwise-uninsured homeowners to buy. If homeowners can't pay for this "force-placed" coverage, Nationstar forecloses on their homes and sends the bill to mortgage bond investors.
New rules by the
But some large subprime-mortgage servicers appear to be trying to skirt those rules. They are selling or have sold the nearly nonexistent insurance agencies or have already made profitable business arrangements to try to comply with the new rules.
The multimillion-dollar deals illustrate how regulators are still wrestling with messy banking practices more than six years after the housing market's collapse. They also mean that newly sold insurance subsidiaries have an incentive to compel struggling homeowners to buy costly policies, to justify the high sales prices commanded when the insurance agencies were sold.
Harwood collected more than
Force-placed insurance is a type of backup property insurance meant to protect mortgage investors' stake in uninsured properties. Standard mortgages require borrowers to maintain homeowners insurance and authorize the loan's servicer to buy coverage when borrowers don't. If the borrowers don't pay for the new insurance, servicers foreclose on their properties and stick the bill to mortgage investors.
Nationstar's first attempt to sell its affiliated insurance agency fell through early this month after The Associated Press raised questions about the deal, prompting
Nationstar declined to discuss details of Harwood's business.
In court, however, Nationstar has opted not to fight to defend its arrangements. Earlier this month,
It's unclear how or whether the
The nation's third-largest servicing company,
In an Irish bond prospectus filed last year, Carrington's parent company disclosed that a buyer had paid it
Carrington executives denied that its obligation to deliver
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