Tags: Banks | homeowners | expensive | insurance

WSJ: US to Crack Down on 'Forced' Homeowners Insurance

By Dan Weil   |   Tuesday, 26 Mar 2013 02:17 PM

The Federal Housing Finance Agency is going after banks for pushing expensive home insurance, which earns the banks large fees, on struggling homeowners.

The FHFA is seeking to ban the hefty fees and commissions insurers are paying to banks for the “force-placed insurance,” The Wall Street Journal reports.

The FHFA’s policy would apply to all mortgages guaranteed or owned by Fannie Mae and Freddie Mac, or about 50 percent of those outstanding.

Editor’s Note: Put the World’s Top Financial Minds to Work for You

The coverage is offered to homeowners whose original insurance policy ends, usually because the borrower stops paying for it. Critics complain that the fee structure offers banks an incentive to guide homeowners to more expensive insurance policies than they need, according to The Journal.

The policies in question typically carry premiums twice as expensive as normal homeowners insurance and in some instances 10 times more expensive. Almost 6 million force-placed policies have been sold in the past four years, according to insurance industry data, the paper reports.

Meanwhile, the housing rebound continues. The S&P/Case-Shiller index of property values in 20 cities jumped 8.1 percent in January from a year earlier, the largest gain in more than 6 ½ years.

“Economic data continue to support the housing recovery,” David Blitzer, chairman of the S&P index committee, said in a statement. “Steady employment and low borrowing rates pushed inventories down to their lowest post-recession levels.”

Brian Coester, CEO of appraisal company Coester VMS, is bullish on housing.

“The housing market’s actually doing about as well as it can right now,” he tells Newsmax TV. “And it’s going to get significantly better. 2013 is set up to be a really great year, and that should continue to 2014-15 with a huge built-up demand for purchases.”

Editor’s Note: Put the World’s Top Financial Minds to Work for You

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