Allegations over the force placed policies and the practices surrounding them have led to the payout.
A federal judge recently signed off on a JPMorgan Chase settlement that will have the lender paying out a minimum of $300,000 to approximately 750,000 mortgage customers who had expensive homeowners insurance forced upon them.
Force placed insurance is commonly applied to mortgage borrowers who let their coverage lapse, breaching their contract.
When the required homeowners insurance is allowed to lapse by the mortgage borrower, or if they simply stop paying it, the lender is permitted to apply force placed insurance to re-establish coverage on the property, at the expense of the borrower. That said, across the country there has been a wave of improper practices in terms of the purchasing on these policies, and legal actions over the last several months have found lenders paying out hundreds of millions in order to settle the cases.
Force placed policies have been purchased at far higher rates than regular homeowners insurance policies.
Moreover, those policies also frequently provide notably less coverage, despite their higher premiums.
In this particular class action lawsuit, it was alleged that Chase was receiving commissions and kickbacks, and that it wasn’t simply a matter of higher rates being charged by the insurer, Assurant. The plaintiffs in the case said that the bank was buying force placed policies with a higher premium because they had the opportunity for financial gain by doing so.
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The settlement has now said that Chase is not permitted to earn any commissions on any force placed insurance policies for the next six years. This, despite the fact that Chase says that it had “stopped accepting commissions several years ago” and that it has not admitted to any wrongdoing.
The payments that will be made by Chase to the borrowers who were affected by this case will be 12.5 percent of their net premium.
This is far from the only settlement of this type that has occurred over recent weeks. Moreover, there are also similar lawsuits that remain pending regarding this type of forced homeowners insurance, against Wells Fargo, HSBC, Citigroup, and Bank of America, to name a few.