I understand that Bank of America and Balboa Insurance may have had an opportunity to misuse the force-placed mortgage product. If this happened, this is a case of bad actors doing bad things. You should pursue the bad actors, not a product you do not fully understand.
Based on actual losses paid, the enormous amount of administration, regulation, and borrower discloser required, the product itself is far from overpriced and is highly regulated. The borrowers and investors scream just as loudly if the lender does not maintain proper coverage on their collateral when a natural disaster hits.
The borrower disclosers you mention are actually state mandated and the price is insurance department approved. The maintenance of insurance on collateral is also required by the Fed, OCC, FDIC, etc. in that they penalize a bank for not doing it properly.
Lastly, if the borrowers are purchasing the required insurance that their mortgage contract calls for they can typically purchase it cheaper, customize the cover more, and keep it out of their loan. Unfortunately, all borrowers do not do this. That is why we have a force-place flood insurance program from the National Flood Insurance Program.
The Plateau Group
Editor's Note: The Plateau Group markets lender-placed coverage to community banks.