Financial agencies in 47 states and Washington D.C. have reached a $15.5 million settlement with one of the nation’s largest mortgage servicers, according to the Conference of State Bank Supervisors (CSBS).
A multi-state examination of NewRez LLC, based in Fort Washington, Penn., 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.
Force-placed insurance is often required when a homeowner’s policy is canceled, delinquent or is insufficient in 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.
Under the terms of the settlement, NewRez will pay a total of $15.5 million with $4.5 billion of that going to impacted borrowers and an additional $11 million for costs and penalties. Further, 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.
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.