LINCOLN – Nebraska and 48 state financial agencies in 47 states have reached a $15.5 million settlement with one of the nation’s 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 the 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. The company also must implement other actions to strengthen controls.
Nebraska is receiving $59,376.09 as its share of the settlement. Remediation to consumers nationwide will be $4,511,242.16.
The settlement resolves an issue discovered in a multistate examination of NewRez that found the company had improperly imposed force-placed insurance on more than 4,200 borrowers with active homeowners’ insurance policies, causing consumer harm in the sum of more than $4.5 million.
“Nebraska’s Department of Banking and Finance routinely works in partnership with other states and federal regulators,” said Kelly Lammers, Director of the Nebraska Department of Banking and Finance. “We monitor unexpected behavior from financial solutions, including out-of-state mortgage companies and other entities licensed to do business in this state, and respond to Nebraskans’ questions. This settlement reflects both recognition of past practices as well as a commitment to work cooperatively as we move forward.”
Force-placed insurance is often required when a homeowner’s policy is cancelled, delinquent or is insufficient in coverage and the borrower has failed to secure replacement coverage. If necessary, the lender, bank, or loan servicer may force the replacement coverage, which allows the lender to protect its financial interest in the property. This practice usually is significantly more costly than if a consumer secures their own insurance policy.
The District of Columbia led the enforcement team, with the assistance of Arkansas, Iowa, Massachusetts, and Montana. NewRez cooperated with the states in the settlement.
Nebraska residents who have questions about the enforcement action should contact (402) 471-2171 or (531) 893-3615. Residents can also visit NMLS Consumer Access to verify that a company is licensed to do business in Nebraska, and they may also view past enforcement actions.
