I’m so relieved that the Consumer Financial Protection Bureau, an agency created in 2010, with it’s first Director appointed last month, is taking on the issue of home insurance premiums! I knew that insurance companies tended to raise their rates when consumers fell behind on payments, as the article states, but the questionable practice that really concerns me is when they jack up their rates shortly after a home sale closes and the new homeowners have moved in! The home purchasers are often quoted a lower rate when they apply for their insurance binder, which they are required to do (*5) days after they reach mutual acceptance on their offer. Purchasers ARE given notice within the insurance addendum of their contract that this MAY happen, but with all the paperwork, thoughts on moving, the stress of taking on a new mortgage payment, insurance premium amounts are often overlooked + PARTICULARLY if they are paid as part of mortgage payment.
* Buyers can choose the number of days they write into their purchase contract, but the default, if they write in nothing, is five (5) days.
+ Buyers can opt to pay taxes and insurance themselves, separate from their mortgage payment
Here is the article from today’s issue of Housing Wire
CFPB takes on forced-place insurance
Richard Cordray, head of the Consumer Financial Protection Bureaucontinues to lay out the agency’s plan for regulating mortgage servicers. One such point of contention is the practice of pushing consumers into high-cost insurance known as “forced-place insurance.”
That’s when a homeowners falls behind on insurance and their servicers place them in a new, often more expensive program. Servicers often do so, without giving a reason for any higher-than-market costs. Cordray wants this to end.
According to the Washington Post the CFPB said it will prohibit servicers from charging for new insurance unless there is a reasonable belief that homeowners have fallen behind on their payments. It also plans to allow consumers to find their own replacement insurance, rather than rely on the more expensive option from the servicer.