The New York State Department of Financial Services (DFS) today announced that it joined state financial agencies in 46 states in securing a $15.5 million settlement with one of the nation’s largest mortgage servicers for imposing “force-placed” insurance costs on borrowers who already had active homeowners insurance policies. NewRez LLC has returned $409,026 to impacted New Yorkers and will pay a $602,226 penalty.
“The Department is committed to protecting consumers and holding institutions accountable for their responsibilities to New Yorkers” said Acting Superintendent Kaitlin Asrow. “I thank our partner agencies from across the nation for working with us on this multi-state enforcement action.”
The settlement resolves a multi-state examination’s finding that NewRez had imposed force-placed insurance on more than 4,200 borrowers nationwide who had active homeowners insurance policies, causing consumer harm totaling $4.5 million. The Pennsylvania-based company paid $4.5 million in restitution to the impacted borrowers and will pay an additional $11 million to state regulators for costs and penalties. NewRez is also required to implement new controls and conduct enhanced monitoring for loans that have force-placed insurance.
Force-placed insurance is often required when a homeowners policy is cancelled, delinquent, or 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.
New York residents who have questions about the enforcement action can https://www.dfs.ny.gov/complaintcall (800) 342-3736. Residents can also visit NMLS Consumer Access to verify that a company is licensed to do business in New York State, and they may also view past enforcement actions.
Read the NewRez consent order on the Department’s website.
