Bank of America Sued by Homeowners over Force-Placed Insurance
AnotherÂ Bank of America lawsuitÂ has surfaced by homeowners who say the company overcharged them with the use of so-called force-placed insurance. The bank has faced severe criticism in the past for issuing thisÂ lender-imposed form ofÂ homeowners insuranceÂ to borrowers who were unable to pay its high costs.
Bank of America LawsuitÂ AllegesÂ Homeowners Overcharged
A group of homeowners with mortgage loans from BofA alleged that they’ve been overcharged for home insurance from the lender and have now proceeded with aÂ Bank of America lawsuit.
Being forced to pay for insurance issued by mortgage companies after private home insurance policies lapse — also known as force-placed insurance — the homeowners say they have become victims of the bank’s “financial windfall,” according to a complaint filedÂ Monday in West Palm Beach.
Charging much more for coverage than private home insurance companies that homeowners typically use, the suitÂ alleges a “substantial portion of the premiums are refunded to Bank of America or its affiliates and subsidiaries through various kickbacks, reinsurance and/or unwarranted commission.”
The homeowners who filed the Bank of America lawsuit are seeking to proceed on behalf of U.S. borrowers who were charged for force-placed insurance issued by the bank, or one of its affiliates.
Force-Placed Insurance Displaces Homeowners
Force-placed insurance has been known to displace homeowners due to the high costs associated with the coverage. Since home insurance costs are directly linked to mortgage loan payments, many homeowners who are unable to keep up with both were forced into foreclosure.
RegulatorsÂ examining force-place insurance have revealed that Bank of America insurance premiums cost as much as 10 times the amount of privately-purchased insurance.Â Also, some recipients of this coverage say they have been forced to take the insurance, even when they are paying for their own coverage elsewhere.
This is not the first time Bank of America has come under fire for its use of force-placed insurance. Earlier this year, a number of major banks and home insurance companies were investigated by New York’s Department of Financial ServicesÂ for allegedly steering borrowers into the high-priced coverage.
In mid-June, the New York regulator ordered that home insurance companies QBE and Assurant cut the prices they charge homeowners for the policies.