New Jersey and state financial agencies in 46 states have reached a $15.5 million settlement with one of the nation’s largest mortgage servicers for improperly imposing “force-placed” insurance costs on borrowers who already had active homeowners insurance policies.
Under the terms of the settlement, Fort Washington, Pa.-based NewRez LLC will pay a total of $15.5 million. The company worked with state regulators to self-identify and remediate more than $4.5 million owed to impacted borrowers, and it will pay an additional nearly $11 million for costs and penalties.
NewRez will be required to implement and conduct enhanced monitoring of loans with force-placed insurance. The company must also implement additional actions to strengthen controls.
The settlement resolves an issue discovered during a multistate examination of NewRez, which found the company had improperly imposed “force-placed” insurance on more than 4,200 borrowers nationwide who already had active homeowners insurance policies, causing consumer harm totaling $4.5 million.
In New Jersey, there were 208 impacted borrowers, all of whom have received restitution totaling $225,783.08. The settlement agreement and consent order in this matter are now final, and the penalty for the participating states has been determined, with New Jersey receiving $518,296.09.
“This Department, in cooperation with our banking regulatory partners nationwide, takes consumer protection and enforcement of New Jersey mortgage servicing laws very seriously,” said New Jersey Department of Banking and Insurance Acting Commissioner Susan Ochs.
“This settlement demonstrates our commitment to ensuring that mortgage servicers follow the law and don’t impose unnecessary costs onto New Jersey homeowners.”
Force-placed insurance is often required when a homeowner’s policy is canceled, delinquent or insufficient in coverage, and the borrower has failed to secure replacement coverage. If necessary, the lender, bank, or loan servicer may require replacement coverage, thereby protecting its financial interest in the property. This practice is usually significantly more costly than securing their own insurance policy.
The District of Columbia led the enforcement team, with the assistance of Arkansas, Iowa, Massachusetts and Montana. NewRez cooperated with the states in the settlement.
New Jersey residents who have questions about the enforcement action should contact the Department’s Consumer Inquiry and Response Center at 1-800-446-7467 or 609-292-7272. Residents can also visit NMLS Consumer Access to verify that a company is licensed to do business in New Jersey.