WASHINGTON – April 1, 2013 – The Federal Housing Finance Agency (FHFA) that oversees government-owned Fannie Mae and Freddie Mac says there’s a problem with force-placed insurance policies that lenders issue in the name of a homeowner who has allowed his property insurance to lapse.
In the March 29, 2013, Federal Register (Vol. 78, No. 61), FHFA says premiums for force-placed insurance can be “double those for voluntary insurance and, in certain instances, significantly higher.” FHFA claims overpriced policies can impact Fannie and Freddie if they force a homeowner into foreclosure and “the expense is passed along to (Fannie Mae and Freddie Mac) for reimbursement.”
FHFA cites two general solutions for force-placed insurance in the Federal Register:
1. Ban lenders and loan servicers from “receiving, directly or indirectly” payments for placing coverage with an insurer or maintaining placement.
2. Ban lenders and loan servicers from receiving money from any reinsurer (a non-public insurer that covers private insurance companies) that is “owned by, affiliated with or controlled by the sellers or servicer.”
To read the complete rule proposal, check the Federal Register.
FHFA is accepting public comment on the new rules until May 28, 2013.
Specifically, FHFA says it wants to enhance “transparency and consumer and investor protections” on force-placed insurance. It also wants to find out if there is any downside to its proposals – any “data or information that would run contrary to the intended results sought by FHFA.”
FHFA will accept public input through its Office of Housing and Regulatory Policy (OHRP). Communications may be addressed to Federal Housing Finance Agency, OHRP, Constitution Center, 400 Seventh Street SW., Ninth Floor, Washington, DC 20024.
© 2013 Florida Realtors®