Lender-Placed Boston Area Insurance Facts

Having a Boston area insurance policy is vitally important to both mortgage lenders and property owners. And no subject is quite as controversial as “force-placed” or “lender-placed” insurance coverage. As the name implies, lender-placed insurance is a policy implemented by the mortgage holder in the event the homeowner has insufficient coverage or allows the coverage to lapse.

Lender-Placed Boston Area Insurance Isn’t New

Having proper coverage in the Boston area insurance market is required by lenders.

Forced coverage by mortgage lenders has been around for a long time. At first glance, most people would logically agree that a lender has the right — even the obligation to its shareholders — to insure the asset it financed in the event the borrower isn’t sufficiently covered by flood insurance, fire, or other perils. Where most consumers, especially those homeowners who have had lender-placed insurance imposed upon them, have a major concern is when the cost of the insurance is considered exorbitant, non-competitive, or excessive. To many, the commission received by the lender from the insurance company is considered a “kickback.”

There is continuing controversy surrounding forced insurance and the whole notion of the kickbacks lenders receive. With the implementation of the Dodd-Frank legislation and the origin of the Consumer Financial Protection Bureau (CFPB,) many industry insiders question why this practice still remains.

An industry landmark legal case led the CFPB to establish a checklist designed for loan servicers regarding forced-placed insurance. It was decided that steering homeowners into higher-cost insurance policies was not a good business practice. Two participating companies — a bank and an insurance firm — agreed to pay $1.8 million to end a class action lawsuit and return a substantial amount of the insurance commissions to the consumers involved.

The lesson to be learned here for homeowners with Boston area insurance policies is to make sure they meet minimum requirements to cover your mortgage and, if required, maintain flood insurance coverage at all times. Failure to do so will result in the mortgage lender taking out a policy on your behalf — and charging you for it.

See more news pertaining to Boston area insurance under our Boston Insurance section of articles to your right just below our Boston Real Estate Categories. We also post tips on Facebook and Twitter. Follow us there for many other real estate related news articles and tips, as well.

Keep Your Boston Area Home Safe While Away

Here are a few tips to keep your Boston area home safe from thieves while you’re away enjoying your summer vacation, so you’re not having to file a claim on your homeowner’s insurance when you get back.

Taking a few steps to prepare your Boston area home to look like you’re home, even when you aren’t, could mean the difference in you discovering someone came to visit while you were away, or finding your home just the way you left it.