On August 12, CSBS announced that state financial regulators from 46 states and Washington, D.C., reached a $15.5 million settlement with a mortgage servicer resolving findings from a Multi-State Mortgage Committee examination that the servicer allegedly imposed “force-placed” insurance costs on more than 4,200 borrowers who already had active homeowners insurance policies in violation of RESPA and its implementing regulation, Regulation X. CSBS explained that force-placed insurance is often required when a homeowners policy is canceled, delinquent or insufficient and the borrower has failed to secure replacement coverage, but that this practice is usually significantly more costly to the consumer than if they had secured their own insurance policy.  The settlement includes more than $4.5 million in borrower remediation, along with nearly $11 million in administrative costs and penalties.

Under the terms of the settlement, the servicer neither admitted nor denied wrongdoing and agreed to implement enhanced servicing review standards, including monthly testing of newly boarded loans with force-placed insurance in participating states. The order allows the servicer to cure testing failures by terminating improper force-placed insurance and refunding premiums and fees paid by affected borrowers. The order also requires a self-audit of force-placed insurance fees collected or refunded for newly boarded loans from January 1, 2023, through the order’s effective date and requires the servicer to refund any premiums or fees paid by borrowers for erroneously placed policies identified through that audit.