Waters Applauds Inspector General’s Investigation of Force-Placed Insurance
Following the release of a report from the Federal Housing Finance Agency (FHFA) Office of Inspector General (OIG) urging officials to take legal action against servicers and insurers over practices related to force-placed insurance, Congresswoman Maxine Waters, Ranking Member of the Financial Services Committee, praised the FHFA for investigating the issue, and raised concerns about the report’s “staggering” findings that the government-sponsored enterprises are estimated to have overpaid for insurance by $158 million in 2012 alone. Waters also urged the FHFA to follow-up on the IG’s recommendation to consider litigation.
She released the following statement:
“I applaud the Federal Housing Finance Agency (FHFA) Inspector General (IG) for investigating the issue of force-placed insurance – an area of the market that I have long been focused on reforming. The IG report documents troubling sweetheart contracts between force-placed insurers and mortgage servicers that have long driven up costs for borrowers, and, in turn, taxpayers who have invested in Fannie Mae and Freddie Mac. I wrote to the FHFA in February of last year, urging it to take action to restrict lucrative profit-sharing arrangements between insurers and servicers, and I am pleased that FHFA’s reforms became effective on June 1st.
I now encourage the FHFA to follow-up on the IG’s recommendation to assess the appropriateness of litigation against servicers and insurers over practices related to force-placed insurance. As the report documents, Fannie and Freddie are estimated to have overpaid for insurance by $158 million in 2012 alone – a staggering figure that represents direct losses borne by the taxpayer. Given the enormity of these overpayments, the FHFA should take steps to hold any and all wrongdoers accountable.”
Force-placed insurance (FPI) is insurance placed on a borrower’s home when the borrower fails to maintain their own insurance policy or provide evidence of insurance as required by the loan agreement. Congresswoman Waters has long raised concerns about the cost and use of FPI through her broader advocacy for mortgage servicing reform. In 2013, she wrote acting FHFA director Ed DeMacro, raising questions about FHFA’s recent decision to prohibit Fannie Mae from moving forward with a plan to save taxpayers and borrowers from unnecessarily high costs related to FPI.