The Federal Housing Finance Agency should sue force-placed insurers and large banks for inflating prices and generating losses for Fannie Mae and Freddie Mac, the agency's inspector general says.

Fannie and Freddie suffered $158 million in "financial harm" in 2012 alone from reimbursing servicers for "excessively priced" force-placed insurance, according to a report set for release Wednesday by FHFA's inspector general. The government-sponsored enterprises reimbursed servicers for $327 million in force-placed insurance premiums last year and for $587 million in premiums from 2009 to 2011, the report found.

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