Fannie Mae takes charge on forced-place insurance, announces changing of rules

Mortgage InsuranceThe issue of force-placed insurance has been thrust into the limelight this week by the Federal National Mortgage Association, more commonly known as Fannie Mae. Forced-placed insurance is a practice that some insurance companies and banks utilize to force homeowners to purchase expensive insurance policies. In New York, insurance regulators have been investigating the issue in the local industry. Spurred by state, federal and consumer attention, Fannie Mae has announced that it will be changing the rules concerning forced-placed insurance.

For one, the government-sponsored enterprise will be overseeing forced-placed policies itself instead of allowing banks and other financial institutions to do so. The company notes that forced-place insurance is often an issue because most homeowners are required to purchase insurance coverage as a provision of their mortgage. These mortgages sometimes impose strict requirements regarding the type of coverage homeowners must have, making their options slim. Fannie Mae has issued a letter to several insurance companies in the U.S. inviting them to compete in the market as a way to bring more options to consumers and reduce the abuse of forced-place insurance practices.

Andrew Wilson, a spokesman for Fannie Mae, says that the goal is to “reduce costs for Fannie Mae and, thereby, taxpayers.” Wilson also claims that the company is working to break down the barriers that keep homeowners from catching up on their loans. Part of this will be done by reducing the cost of some insurance policies.

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