Congresswoman Maxine Waters, Ranking Member of the House Committee on Financial Services, today commended a proposalby the Federal Housing Finance Agency (FHFA) that would ban the payment of lucrative commissions and reinsurance fees to banks in return for their purchase of “force-placed” insurance.
Currently, mortgage servicers are permitted to require homeowners to purchase property and casualty insurance when their policies lapse. Servicers and banks often benefit from arranging this insurance at substantially higher costs to borrowers and the taxpayer.
Congresswoman Waters had expressed strong concerns about this practice in a recent letter to Acting Director Edward DeMarco about the FHFA’s previous decision to halt Fannie Mae’s effort to reform the force-placed insurance market. She reacted to today’s announcement by the FHFA with the following statement:
“The proposed change in the FHFA’s policy will benefit consumers who pay dearly for insurance that is artificially inflated because of cozy financial relationships between banks and insurers. I urge Mr. DeMarco to make up for lost time and prevent further losses to borrowers and taxpayers by moving forward with these proposed reforms as quickly as possible.”