The Wisconsin Department of Financial Institutions announced Wednesday that Wisconsin and 48 state financial agencies in 47 states have reached a $15.5 million settlement with NewRez LLC, one of the nation’s largest mortgage servicers, after it imposed “force-placed” insurance costs on borrowers who had current homeowners’ insurance policies.
Under the terms of the settlement, DFI said the Fort Washington, Pennsylvania, company will pay a total of $15.5 million.
Force-placed insurance is often mandated when a homeowner’s policy is cancelled, delinquent or is insufficient in coverage and the borrower is without replacement coverage.
If necessary, the lender, bank, or loan servicer may force replacement coverage, protecting the lender’s financial interest. It is frequently much more expensive than if a person secures their own insurance policy.
The examination of NewRez discovered it had improperly imposed force-placed insurance on more than 4,200 borrowers across multiple states.
NewRez cooperated with the states in the settlement, working with regulators to self-identify and proactively remediate more than $4.5 million to the affected borrowers. It will pay close to $11 million more in costs and penalties.
The company also must conduct enhanced monitoring for loans that have force-placed insurance and implement other measures to strengthen controls.
“This multistate enforcement action and settlement represent another success of networked supervision, where state regulators work together, sharing resources to complete comprehensive examinations and prioritize consumer protection,” DFI Division of Banking Administrator Kim Swissdorf said in a press release.
The District of Columbia led the enforcement team, with the assistance of Arkansas, Iowa, Massachusetts and Montana.
Wisconsin residents who have questions about the enforcement action should contact DFI’s Mortgage Banking section by calling: (608) 261-7578 or emailing DFIMortgageBanking@dfi.wisconsin.gov.
