ND Department of Financial Institutions joins $15M settlement with mortgage servicer
Company wrongly charged customers for force-placed insurance
Washington, D.C. – North Dakota Department of Financial Institutions (NDDFI) and 48 state financial agencies in 47 other states have reached a $15.5 million settlement with one of the nation’s largest mortgage servicers for improperly imposing “force-placed” insurance costs on borrowers who already had active homeowners insurance policies.
Under the terms of the settlement, Fort Washington, Penn.-based NewRez LLC (NMLS ID 3013) will pay a total of $15.5 million. The company worked with state regulators to self-identify and proactively remediate more than $4.5 million to the impacted borrowers, and it will pay nearly an additional $11 million for costs and penalties. NewRez will be required to implement and conduct enhanced monitoring for loans that have force-placed insurance. The company also must implement other actions to strengthen controls.
The settlement resolves an issue discovered in a multistate examination of NewRez that found the company had improperly imposed force-placed insurance on more than 4,200 borrowers with active homeowners insurance policies, causing consumer harm in the sum of more than $4.5 million.
“The penalties and enhanced monitoring requirements underscore the importance of meeting state requirements to protect consumers,” said NDDFI Commissioner Lise Kruse. “Participating in these types of multi-state regulatory efforts illustrates the important role DFI plays in protecting the rights of North Dakota residents.”
Force-placed insurance is often required when a homeowner’s policy is cancelled, delinquent or is insufficient in coverage and the borrower has failed to secure replacement coverage. If necessary, the lender, bank, or loan servicer may force the replacement coverage, which allows the lender to protect its financial interest in the property. This practice usually is significantly more costly than if a consumer secures their own insurance policy.
The District of Columbia led the enforcement team, with the assistance of Arkansas, Iowa, Massachusetts, and Montana. NewRez cooperated with the states in the settlement.
North Dakota residents who have questions about the enforcement action should contact NDDFI Deputy of Non-Depository Division Jan Murtha at jjkmurtha@nd.gov or call the NDDFI at (701) 328-9933. Residents can also visit NMLS Consumer Access to verify that a company is licensed to do business in North Dakota, and they may also view past enforcement actions.
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Heidi LaBree, Business Manager
hmlabree@nd.gov
701-328-9933
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