Home Insurance Fraud

Throughout the firm’s history, Baron & Budd has prided itself as being an advocate for consumers’ rights and standing up against large corporations who would take advantage of people. Now, Baron & Budd is investigating a common practice among banks, mortgage companies and loan servicers that could be costing homeowners millions of dollars in inflated insurance coverage.

The practice is known as “force-placed” or “lender-placed” insurance.

And it has been happening across the country for years.

What is Force-Placed (or, Lender-Placed) Insurance?

Force-placed insurance happens when a homeowner neglects to pay insurance premiums (typically, by accident) or does not obtain certain types of hazard insurance such as flood, wind, hail or tornado. The mortgage company, bank or loan servicer holding the note then has the right to purchase insurance on the homeowner’s behalf and charge the homeowner for the new premiums without any consultation about the insurance company or the costs of coverage. The force-placed insurance is considerably more expensive than insurance homeowners would have purchased on their own.

Some of these policies may even be backdated, so the insurance company can charge homeowners even more without incurring any risk.

Who is responsible for this?

Several mortgage companies, banks and loan servicers have been identified. These include Bank of America, JP Morgan Chase and Wachovia (now Wells Fargo). However, the practice is not limited to these companies.

What can I do?

Keep in mind –these companies are doing what’s in their best interest and what will make them the most money, even if it means defrauded homeowners into overpaying for insurance. Also, banks, mortgage companies and loan servicers actually receive a commission from the sale of a new insurance policy, and when they purchase a forced policy for you, they frequently purchase the inflated policy from an insurance company they own, adding to the amount of the money they are able to pocket.