Property owners in Massachusetts who were sold this coverage through dubious practices will receive $2.7 million.
HSBC, a national mortgage lender and servicer, has now agreed to pay a total of $4 million as a result of its force-placed insurance practices, according to Massachusetts Attorney General Maura Healey.
This payment was the outcome of a settlement in a case in which HSBC was accused of inappropriate practices.
These practices related directly to its sale and management of force-placed insurance. It involved allegations that HSBC had been receiving various forms of “kickbacks”, such as commissions, which had to do with the way it was selling and enforcing these homeowners insurance policies. This specific type of coverage is a form that is automatically put into place when a mortgage carrier has allowed his or her regular homeowners insurance to lapse or when payments have not been made, but when this coverage is a requirement of the home loan.
Of the total, $2.675 million will be paid in restitution to Massachusetts homeowners affected by the force-placed insurance.
The remaining $1.4 million from the total is going to be paid directly to the Commonwealth of Massachusetts. Healy explained that this settlement is meant to offer thousands of Massachusetts homeowners and mortgage carriers with refunds after they were improperly charged with premiums from this forced homeowners insurance policy from HSBC. Those who will be receiving the refunds are the property owners whose premiums included other types of payments to HSBC, such as commissions.
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Healey explained that “Mortgage servicers should not enrich themselves through insurance products at the expense of struggling homeowners.” She also added that “This agreement ensures that HSBC returns the money to Massachusetts consumers it received in violation of state laws.”
The office of the attorney general was also careful to point out that mortgage servicers such as HSBC are frequently required to depend on force-placed insurance providers in order to make certain that mortgage borrowers have kept up their necessary homeowners policies, which are a part of the mortgage contract. The use of this type of policy, when properly put into practice, is perfectly legal and is a standard in the industry.