... Herein of its profitable performance as a financial planning tool for lenders, its lack of deductibles, and its effects on Fiduciary Relations. This updates the post here on January 15, 2012.
In addition to the many features of "force placed" or "forced place" Insurance that were addressed in a post here last week, force placed Insurance also has these prominent features as well:
- At this time, it generates $6 Billion annually, or $6,000,000,000.00 a year. It has grown 6 times in recent years, largely at the expense of Homeowners.
- "[L]ender-placed insurance" is strictly for the benefit of Lenders. Homeowners are not protected by it and there is ordinarily no Deductible.
- Lenders of course are the ones who require Borrowers-Homeowners to agree that Lenders can force the placement of Insurance to protect the Lenders' interests. A Lender's Mortgage Servicer may be, and often is, connected or affiliated with the Insurance Company which issues the force placed Policy. The Mortgage Servicer may not disclose the conflict of interest in that situation and, if there is a loss, the Mortgage Servicer may be reluctant to submit a Claim to its affiliate, the Insurance Carrier which issued the force placed Insurance. In the meantime, the Homeowner of course is charged for the high Premium and, if the Homeowner cannot pay that Premium, the Lender frequently forecloses -- paying the Lender's Mortgage Servicer to bring the Foreclosure proceedings.
See Gretchen Morgenson, "Fair Game / Hazard Insurance With Its Own Perils" p. 1, col. 1 (New York Times Nat'l ed., "SundayBusiness" Section, Sunday, January 22, 2012). "Mind you, force-placed policies do not protect homeowners from loss. Only lenders are covered. But homeowners must pray the freight." Id.
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