Fannie Mae Changing ‘Forced-Place’ Home Insurance Rules

March 7, 2012

  • March 8, 2012 at 12:46 pm
    Anejo says:
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    The story is not written by an insurance person. Force-placed policies aren’t on behalf of the homeowner, they are for the benefit of the lender. The homeowner always has a choice of insurer, if they purchase their own policy. Force-placed comes into play if the homeowner lets their own policy go. Most homeowners go back to their own policy once they see how much their monthly payments go up with the added insurance.

    • March 8, 2012 at 1:27 pm
      Vinnie Goomba says:
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      Do force placed policies cover only the loan, or is property covered, as well?

      • March 8, 2012 at 1:33 pm
        Miguel Reynaga says:
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        Covers the dwelling only which means they are interested in covering the loan. Does not cover personal property etc etc…just the dwelling to protect the loan.

      • March 8, 2012 at 1:39 pm
        P/L U/W says:
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        The bank is only interested in covering theoutstanding loan amount. The coverage is named perils and there are no frills.

      • March 8, 2012 at 1:46 pm
        Anejo says:
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        My understanding is that most cover the loan amount, like force-placed auto. If you have a car worth $10,000 but owe just $500 and total the car, force-placed auto will pay the lender his $500 and get get scrap. There isn’t contents or liability on most forced-placed home either. The lender looks after himself and doesn’t really care about the homeowner.

        • March 8, 2012 at 3:06 pm
          Money Worries says:
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          I agree the lender looks after himself, but I don’t agree with the statement that the lender “doesn’t really care about the homeowner”. The lender has to protect their investment if the Homeowner does not. Some Homeowners purchase homes they can’t afford in the first place and some abandon the property for others to clean up! The Homeowners agree to carry insurance. If they do not, its breach of contract. No, I don’t work for a lender.

      • March 8, 2012 at 1:48 pm
        Anejo says:
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        Can’t see why you’d get a red check for a question? Must be personal. This place is getting nastier by the day.

        • March 8, 2012 at 3:22 pm
          Benefit of the doubt? says:
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          Maybe someone just hit the button too fast, just like a typo. Or not.

          • March 8, 2012 at 7:37 pm
            Anejo says:
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            You may be right. I just tried to red check you but missed… Kidding, you got green

  • March 8, 2012 at 2:08 pm
    Vinnie Goomba says:
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    I don’t get the red check, either but oh well! I guess some people just know everything there is to know about everything so my question must’ve seemed trivial to them.. Thank you for the clarity on force placed coverage, though!

    • March 8, 2012 at 2:15 pm
      Jon says:
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      I may not agree with a lot of what you say, but I also have no idea why you would get red-checked for an honest question…

    • March 8, 2012 at 2:35 pm
      Anejo says:
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      My pleasure

      • March 8, 2012 at 3:30 pm
        Jim says:
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        The “other” thing that these genius reportes don’t tell is that the insurance carrier’s program for the bank automatically insures, virtually without exception, these often not so nice properties every month without benefit of inspections or pictures(something that standard carriers have the luxury of requiring).
        The lenders are reporting these properties to the carrier in super nice neighborhoods like inner city Detroit or Philadelphia. Now the “FEDS”/reporters want to make it look like the insurance carriers are the bad guys with exhorbitant rates/premiums.
        And…like was mentioned earlier, the borrower always has the option of finding his own carrier, unless he has had 4 or 5 losses in the past 4-5 years and wonders why no one wants to insure his dream home…that he not only can’t buy insurance for but also can’t maintain it and some night as he walks away with all the kitchen cabinets, built-in appliances and carpet he can load up in his pickup, including any copper piping he can find, again the insurance carrier steps in to insure it for the loan balance on behalf of the bank. Why, because the “FEDS” who mandated via the mortgage documents, that insurance was required, now require the lender to provide/protect the loan balance for Fannie Mae. If the bank fails to properly insure their loan balance, then, the “FEDS” again, step in and slap a fine on the lender. Oh Yes, again, the lender is suddenly the bad guy! And, if the property happens to go to foreclosure, heaven forbid, guess who now must insure the property with enough coverage to protect it to near replacement cost so if it gets vandalized or broken into and the water left to run all day and all night, that it can be repaired and made ready for sale, frequently at additional cost to the bank.
        Yep, the lenders and the insurance companies must really be the be the bad guys creating all of these problems and screwing the poor borrower who says he didn’t know what he was doing when he had the wool pulled over his eyes at the closing. Gues this will really get a “red check.”

  • March 8, 2012 at 2:30 pm
    Joe D. says:
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    Policies that I have seen provide building coverage only to protect the bank or servicer.

  • March 8, 2012 at 2:49 pm
    LG2 says:
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    It appears Mr. Hunter is working at Fannie Mae or one of his disciples. Once again, another fictional article on lender placed insurance. When is the financial services industry going to take these politicians and regulators on!!!

  • March 8, 2012 at 3:08 pm
    Frank Cabrera says:
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    As an Insurance Profesional and a homeowner, I am torn with this issue. The lender has a right to protect their investment and it is important to have insurance on your home. The problem is that if the premiums arent so high the home owner will not seek their own insurance and therefore, would allow the lender to place the insurance. It is this lack of concern that has created the need for FORCED PLACED insurance in the first place.

    • March 8, 2012 at 9:01 pm
      Maria says:
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      This is becoming the United States of no consequences. Rack up your credit cards can’t pay no problem . Buy a home you cant afford no problem . Can’t afford the insurance on the house you can’t afford no problem Fannie may will help you shop for a great insurance policy no problem.

  • March 8, 2012 at 3:26 pm
    R says:
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    Sometimes the markets do not want to write a policy for the homeowner and the only option is a forced placed policy. Yes, the lender is protecting themselves on the loan but the homeowner is also protected as far as the loan value. No, there is no contents or liability. Sometimes half a loaf is better then none.

  • March 8, 2012 at 8:22 pm
    FurriePrincess says:
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    I’ve seen many where the home was acceptable to a number of standard markets, the bank has its own insurance agency, yet the force placed policy is in a non-admitted carrier. Same with flood insurance. Why are lenders allowed to go to non-admitted carriers for flood and charge several times the federal program rate?

    JMHO – the bank agencies are making more money on the non-standard placements than if they did it the ethical way.

  • March 9, 2012 at 10:20 am
    Kevin McGuire says:
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    This excessive regulation is brought on by the abusive practices in the lender placed insurance industry. The typical arraingment of paying “reimbursements” or “commissions” to lenders is merely a kickback and inducement to do business and the borrower is paying the cost through higher premiums.
    If you have been around long enough, you remember when the lender bore the entire cost of insurance tracking services. When outsourced tracking and insurance placement came about, the lender’s costs were reduced. So the aurgument that the lender incurrs higher costs associated with these programs and is deserving of a “reimbursement” is unbased.

    We only have our own industry to blame.

    Kevin McGuire
    President CEO
    QuieTrack Insurance

  • March 19, 2012 at 10:25 am
    Patti says:
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    Most of you hit the nail on the head. The Feds strong armed the banks to lend money to people for houses they were not financially qualified to buy. My husband is a GI, we had a reasonable down payment when we purchased our home in ’74, and yet we went thru rigourus testing to buy our home. I was even asked that since I was in my 20′s and already had 2 kids, were we planning on having others, and if so, did we have a backup plan to keep the mortgage paid. When you invest in a home,you have the obligation to pay the bank back, and to keep the house insured, which is containted in your loan closing documents. This is considered a contract. Fannie Mae is one of the biggest bigots when it comes to the mortgage crisis in this country (“Don’t do as I do, do as I say”). If the public only knew of the ghosts in their closets. People are signing their deeds over to the banks to avoid foreclosure, and a bad mark on their credit. I agree with the one writer, that no one seems to be responsible for anything anymore.
    Cuomo wants the banks to insure the houses, and not charge the borrowers. In other words, the banks should take the hit, but folks we who pay our bills and do the right thing, will pay for those who don’t (if Cuomo gets his way). I think that he’s bucking for a job in the White House with the next election.



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