DC Leads Multistate Enforcement, Joins $15.5 Million Settlement With Mortgage Servicer Over Force-Placed Insurance

The following information was released by the DC Department of Insurance, Securities and Banking (DISB):

The District of Columbia, leading a multistate enforcement team that included Arkansas, Iowa, Massachusetts, and Montana, and working alongside 48 state financial regulators, has reached a $15.5 million settlement with one of the nations largest mortgage servicers for improperly imposing force placed insurance costs on borrowers who already had active homeowners insurance policies.

Under the terms of the settlement, Fort Washington, Penn.-based NewRez LLC (NMLS ID 3013) will pay a total of $15.5 million. The company worked with state regulators to self identify and proactively remediate more than $4.5 million to impacted borrowers, and it will pay nearly an additional $11 million for costs and penalties. NewRez will be required to implement and conduct enhanced monitoring for loans that have force placed insurance and to strengthen internal controls and compliance processes.

The settlement resolves findings from a multistate examination of NewRez that determined the company had improperly imposed force placed insurance on more than 4,200 borrowers nationwide who had active homeowners insurance policies, causing consumer harm totaling approximately $4.5 million.

When loan servicers force placed insurance on a home without a valid reason, it passes on the cost of these expensive policies directly to the homeowner while offering very little protection and undermines trust in the mortgage system, said DC Department of Insurance, Securities and Banking Commissioner Karima Woods. The District of Columbia led this multi-state enforcement effort to secure restitution for affected borrowers and to ensure NewRez strengthens its controls, so this does not happen again. We will continue to hold servicers accountable and protect consumers from unnecessary and costly charges.

Force placed insurance is sometimes required when a homeowners policy is cancelled, lapses, or is insufficient in coverage and the borrower fails to secure replacement coverage. If necessary, a lender, bank, or loan servicer may procure replacement coverage to protect its financial interest in the property. This coverage is typically significantly more costly than a consumer purchased policy.

NewRez cooperated with the states in reaching the settlement.

District residents who have questions about the enforcement action should contact the DC Department of Insurance, Securities and Banking at DISB.DC.gov or call 202.727.8000. Residents in other states should contact their state insurance or financial regulator for information specific to their jurisdiction. Consumers may also visit NMLS Consumer Access to verify that a company is licensed to do business in their state and to view past enforcement actions.