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The Consumer Financial Protection Bureau issued a proposal Friday that would require mortgage servicers to provide clear monthly statements, earlier disclosures for interest rate adjustments and options to help borrowers avoid foreclosures and costly force-placed insurance.
August 10 -
Consumer advocates and financial services industry officials clashed Thursday over whether banks and insurers are getting paid fairly in the force-placed insurance market.
August 9 -
Officials in Florida, the largest force-placed insurance market in the U.S., are investigating whether banks get kickbacks from insurance firms when they buy the coverage for homeowners behind on their premiums, Insurance Commissioner Kevin McCarty says.
August 6
Note to the financial services industry: if you are going to anger someone, make sure it's not a regulator.
Kevin McCarty, the insurance commissioner of Florida for the past nine years, grabbed attention this month when he
Turns out that McCarty had an insurance policy force-placed on his condominium several years ago because of what he describes as a paperwork snafu. It took more than a year to correct the problem and get his money refunded, he says.
"It was a very, very frustrating — from a consumer perspective, enormously frustrating — experience," he said in an interview after the hearing.
Force-placed insurance is a kind of property coverage that banks purchase when mortgage borrowers stop paying for homeowners insurance. Banks receive a portion of the premiums through commissions, reinsurance deals and other payments from the specialty carriers that offer it. Consumer advocates complain that the system allows insurers to collect expensive premiums and banks to earn lucrative fees even though the loss rates on such coverage tends to be lower than standard homeowners coverage.
McCarty's mortgage lender asked him to provide proof of flood insurance on his South Florida condo in 2005 or 2006, he says. He and his agent responded to that request for information and others, but the agent accidentally sent documentation on the previous year's policy. That coverage, a master policy on the building, had expired, and his agent tried at least 15 times to fax in the copy of the current policy and confirm receipt.
But McCarty's lender hit him with more expensive force-placed coverage in the meanwhile, something he discovered when he received his bill.
One could argue that McCarty does not carry grudges. Some have questioned whether he waited too long to start an investigation considering Florida represents more than a third of the force-placed market;
Still, McCarty's experience made an impression, he says. And banks, which are overseen by other state and federal regulators, bear a responsibility for the product- not just insurers, he says.
"There are legitimate issues that have been raised by consumers about how lender-placed works," he says. "Part of that is on the banks, and part of that might be on the insurance companies. I don't have jurisdiction over banks, but clearly there is a problem."
Recent actions by the
"They are beginning to take assertive action in the banking regulatory community, which heretofore I think has been missing," McCarty says. "And I think we can do what we can on our side."
