The New York State Department of Financial Services settled an investigation into the force-placed insurance practices ofQBE for $10 million, according to the offices of Governor Andrew Cuomo.
QBE will pay that multi-million penalty while also compensating homeowners harmed by QBE’s force-placed insurance practices. The company also agreed to undergo a series of reforms.
Force-placed insurance is the practice of a servicer or bank taking out an insurance policy when a homeowners own insurance policy lapses.
Controversies have developed from the practice with the policies placed on the properties often more expensive than voluntary insurance contracts.
New York Superintendent of Financial Services Benjamin Lawsky said in a statement, "QBE has done the right thing by adopting these reforms. We now need to ensure that the entire industry in New York – 100% of it – is subject to our reforms."
The state’s settlement with QBE follows a deal New York struck with Assurant over the same type of practices. With QBE now settling, Cuomo says the deal resolves issues at two firms responsible for 90% of the force-placed insurance market in New York.
In the case of QBE, New York investigators claim QBE paid commissions to insurance agencies and brokers affiliated with mortgage servicers to secure their business.
In other words, rather than competing in the market by offering lower premiums for insurance, New York regulators claim QBE competed for banks and servicers' insurance business by offering them a share in the profits.
This meant higher premiums for homeowners and potentially more losses born by taxpayers if the loans in question were owned or backed by Fannie Mae and Freddie Mac.
This meant higher premiums for homeowners and potentially more losses born by taxpayers if the loans in question were owned or backed by Fannie Mae and Freddie Mac.
"Typically, the commissions are ten to twenty percent of the premium written on the servicer’s mortgage loan portfolio," Cuomo’s office said. But, he said, "the evidence from the investigation indicates that the affiliated agencies and brokers do little or no work for the commissions QBE had paid them."
New York authorities also pointed out apparent conflicts of interest.
Back in 2011, QBE bought Balboa Insurance Co., the force-placed insurance business of Bank of America. Balboa previously provided force-placed insurance on Countrywide and BOA-serviced mortgages, which are owned in large part by investors, Cuomo said.
The arrangement was profitable for Countrywide and BOA. However, the New York Governor says it also "created a potential conflict of interest insofar as Countrywide’s and BOA’s bottom line could improve as their Balboa subsidiaries force placed more policies."
For the Full Article Click Here: www.housingwire.com
No comments:
Post a Comment