Lender Placed Insurance: Just Another Way Lender’s Don’t Have Borrower’s Best Interest in Mind
How many ways can a borrower get absolutely hit over the head with fees in the loan process? If you think about it, it is amazing how many fees are involved with the loan process. I mean you have fees such as the “document preparation fee;” the “email fee” (a fee some mortgage brokers will charge you to receive and print out an email); the oh-so-wonderful “admin fee;” the Yield Spread Premium (“YSP”); the Service Release Premium (“SRP”); and on and on and on. Unless you are highly sophisticated in the loan industry, it is virtually impossible to know what is customary, normal, or reasonable.
What’s worse is that these fees do not stop at the origination phase. The abusiveness of fees in the loan process can even continue well into the servicing of your loan. Specifically, borrowers can get price-gouged in their impound accounts. In simple terms, an impound account is a trust account established by the lender to hold the borrower’s money to pay for real estate taxes, and insurance premiums. These accounts are a measure that lenders take to mitigate the chance that a borrower will default on his loan. For instance, impound accounts assure the lender that the borrower’s property taxes are timely paid (to avoid liens) and that the borrower’s insurance is paid on time (to avoid uninsured loss.) Borrower’s are taught to view impound accounts as a good thing because the borrower does not have to worry about paying taxes or insurance himself because the lender “takes care of it.”
There’s the background, and here’s the rub. What the lender fails to mention when they purchase insurance on a borrower’s behalf via an impound account, is that they will opt to purchase an exorbitantly high priced insurance. In fact, as I have recently discovered (because it happened to me), the “lender-placed” insurance that the lender will purchase is about 3 times (3 times!) as expensive as the insurance the borrower can procure for himself! To make matters worse, unless the borrower is savvy concerning his real estate costs, he will never know that he is paying too much for his insurance. Unfortunately, the lender can make this excessive purchase without any forewarning and/or explanation to the unsuspecting borrower.
Certainly, every borrower would want to know if he is being assessed a fee more than three times the normal cost. Personally, I cannot think of the situation where I would willingly pay over a 300% markup to have someone purchase something for me. As a real estate attorney, I consider myself sophisticated concerning real estate issues. However, up and until last week, I had no idea how the lender-placed insurance system (or gimmick) works. When I caught on, I personally called my lender to inquire about this practice. I spoke with three representatives, including a supervisor, and was met with the typical “I don’t know” response. Interestingly, all representatives did openly admit to the fact that if the lender purchases the insurance on behalf of the borrower it will be about 3 times as much the price the borrower would pay if the borrower pays for it on his own.
I wonder how many teetering borrowers have been pushed into default as a result of this practice? Only the lenders would be able to tell us. As a legal practitioner, I view this lender-placed insurance practice as posing a huge risk to loan servicers for a nationwide class action. Maybe it will take a class action lawsuit to expose and stop this practice in the future. The bottom line is that this practice needs to stop. Not only is it highly unfair to the unsuspecting borrowers in the national mortgage marketplace, it exposes lenders and servicers to substantial liability.
84 Responses to “Lender Placed Insurance: Just Another Way Lender’s Don’t Have Borrower’s Best Interest in Mind”
Leave a Reply
You must be logged in to post a comment.
May 3rd, 2008 at 1:25 pm
Wow! I had no idea that brokers were able to essentially charge a YSP in the form of an SRP as long as they act as the correspondent lender. Unreal!
May 3rd, 2008 at 1:28 pm
Morgan -
correspondent lenders are different than mere brokers. They take on the risk of a normal lender until they sell the loan. If they cannot sell the loan, they don’t get to collect any SRP. I think they shouldn’t have to disclsoe the SRP
October 7th, 2008 at 12:21 am
This is way out of payday loans territory; these numbers are staggering. Washington Mutual, which was bought out by J. P. Morgan Chase in the largest bank failure scenario in our history, disclosed debts of $8.1 billion and assets of $32.8 billion. Once depositors withdrew $16.7 billion in eight days, WaMu had a serious “liquidity crisis” on its hand. For the average person, let’s find out what a “liquidity crisis” is. Per Wikipedia, “a liquidity crisis occurs when a business experiences a lack of cash required to grow the business, pay for day-to-day operations, or meet its debt obligations when they are due.” And all that J. P. Morgan had to pay to acquire WaMu was $1.9 billion in an FDIC auction. Now J. P. Morgan will chart the failed institution’s course and determine its future, not the FDIC. They would have had to pay billions to bail out all of the insured customers who bank there, which some feel would have drained their own supply to dangerous levels. J. P. Morgan Chase assures customers it will be business as usual, but with more bank failures mounting on the horizon, how long will that remain true? Payday advance is truly small potatoes by comparison.
October 10th, 2008 at 12:38 pm
Great work.
October 15th, 2008 at 1:38 am
We have been an ebay power seller and paypal confirmed seller of wow gold for years.
November 19th, 2008 at 9:51 pm
I was force placed and my agent was able to get my force placed bill reduced drastically because their Agency was part of the Safety Net Insurance Program. My family use to own an Agency and I think everybody should have this. The program site is www.noforceplaced.com
Rjon
November 20th, 2008 at 3:17 pm
На твой сайт знакомый скинул ссылку в асю. думал спам )) ошибся
November 22nd, 2008 at 1:18 am
Автор, у тебя посты никто не крадет c блога? А то меня вывели уже - тырят и тырят. Только тем и занимаюсь что отлавливаю их…
November 27th, 2008 at 10:44 am
Нелегко встретить человека, который, отдав учению три года жизни, не мечтал занять высокий пост….
http://www.helpma.org/blog/?p=14…
December 4th, 2008 at 9:54 am
На твой сайт подруга скинула ссылку в асю. думал спам )) ошибся
December 15th, 2008 at 9:21 am
t3likmurxf9amn3 http://www.944426.com/258627.html pdwyqrzte
December 20th, 2008 at 7:37 am
Готов перечитать статью ещё раз. Хороший матерьял и написанно просто! ТО что надо.
December 20th, 2008 at 7:54 am
Хорошо, что вы уделяете столько времени для своего сайта.
December 20th, 2008 at 8:15 am
Блог интересный и полезный. Разместите все-таки информацию о donations (денежных перечислений от посетителей блога). Можно указать электронные кошельки или sms копилку. Я бы перечислил.
December 20th, 2008 at 8:25 pm
Пишите еще, жду с нетерпением
December 20th, 2008 at 8:40 pm
Хороший пост! Читать мне было интересно. Теперь буду еще чаще заглядывать к вам на блог.
December 21st, 2008 at 9:16 am
Конкурс для блоггеров от DRUGREVENUE с призовым фондом в 3000 долларов, спешите
December 21st, 2008 at 8:24 pm
Спасибо за пост, он просто суперовый
December 21st, 2008 at 8:24 pm
Четко, по полочкам разложено
April 4th, 2009 at 4:01 am
Автор молочик!…
http://www.helpma.org/blog/?p=14…
April 5th, 2009 at 11:57 am
Полезная информация, спасибо!…
http://www.helpma.org/blog/?p=14…
April 8th, 2009 at 9:27 am
Читаю и не ощущаю назло слякотной погоде…
http://www.helpma.org/blog/?p=14…
April 12th, 2009 at 11:47 am
Если не секрет.какой фоот?…
http://www.helpma.org/blog/?p=14…
April 17th, 2009 at 12:28 am
Лучше не напишешь…
http://www.helpma.org/blog/?p=14…
April 30th, 2009 at 8:48 am
Хорошо, молодец…
http://www.helpma.org/blog/?p=14…
May 2nd, 2009 at 1:33 am
Умничка…
http://www.helpma.org/blog/?p=14…
May 5th, 2009 at 9:38 am
Ты навеял спокойствие, равновесие. Люблю читать….
http://www.helpma.org/blog/?p=14…
May 17th, 2009 at 2:33 am
Это же очевидно…
http://www.helpma.org/blog/?p=14…
May 27th, 2009 at 4:07 pm
Ага;-) монитор в обнимку и вперед…
http://www.helpma.org/blog/?p=14…
May 30th, 2009 at 5:46 am
Мощно!!!…
http://www.helpma.org/blog/?p=14…
June 10th, 2009 at 11:21 am
Здорово! просто сердце замирает :))…
http://www.helpma.org/blog/?p=14…
June 16th, 2009 at 1:14 pm
поздравляю с успехом…
http://www.helpma.org/blog/?p=14…
June 26th, 2009 at 2:22 am
Молодец!5+…
http://www.helpma.org/blog/?p=14…
June 26th, 2009 at 3:19 am
Вот где Платонова порылась:)…
http://www.helpma.org/blog/?p=14…
July 5th, 2009 at 1:24 pm
Хорошо, молодец…
http://www.helpma.org/blog/?p=14…
August 18th, 2009 at 3:53 am
Хранить на крыше…
Хранить на крыше кровельные материалы, та&…
August 18th, 2009 at 3:56 am
«духа не должно…
360
«духа не должно превышать 1,5 МПа, а последни…
August 21st, 2009 at 7:37 am
В каждой стране…
В каждой стране имеются свои специфическ&#…
August 31st, 2009 at 7:06 am
В области технологии…
В области технологии кирпичной кладки но&#…
September 1st, 2009 at 1:58 am
Его третьим каналом…
Его третьим каналом стали сервисные и общ&…
September 1st, 2009 at 2:46 am
Рис. 1. Схема…
Рис. 1. Схема механизма силы разуплотнения l…
September 2nd, 2009 at 2:26 am
Крупнейшей солнечной установкой…
Крупнейшей солнечной установкой в Дании &…
September 2nd, 2009 at 2:41 am
При монтаже автопоилки…
При монтаже автопоилки необходимо учиты…
September 3rd, 2009 at 3:56 am
Другой метод, который…
Другой метод, который помогает людям разв&…
September 4th, 2009 at 9:12 am
…
IE6 - ! - . …
January 15th, 2010 at 12:23 pm
Ñîâðåìåííàÿ ÑÒÎ ýôôåêòèâíî è êà÷åñòâåííî âûïîëíÿåò ñâîè ôóíêöèè ïðè ïîìîùè ðàçëè÷íîãî âèäà îáîðóäîâàíèÿ…
àâòîðåìîíò…
January 19th, 2010 at 12:07 pm
Øèðîêèé ñïåêòð ñîâðåìåííîãî øàõòíîãî è ãîðíîîáîãàòèòåëüíîãî îáîðóäîâàíèÿ íàñ÷èòûâàåò áîëåå 100 íàèìåíîâàíèé…
âèáðàòîðû, ãðîõîòû, æåëåçîîòäåëèòåëè…
January 25th, 2010 at 11:47 am
àñôàëüòîóêëàä÷èêè, àâòîêðàíû, áóëüäîçåðû, ãðåéäåðû, êàòêè, ïîãðóç÷èêè, ýêñêàâàòîðû…
Ïîãðóç÷èêè èñïîëüçóþòñÿ äëÿ çàñûïêè, ðàñêîïêè, âûðàâíèâàíèè è äðóãèõ ðàáîò ñ ðàçëè÷íûìè ìàòåðèàëàìè…
February 8th, 2010 at 1:35 am
Êàê çàðàáîòàòü â èíòåðíåòå…
èíñòðóêöèè ïî çàðàáîòêó â ñåòè…
February 9th, 2010 at 5:21 am
Ïÿòèçâåçäî÷íûå îòåëè Åãèïòà…
Åãèïåò - æåì÷óæèíà ìèðîâîé êóëüòóðû…
February 13th, 2010 at 11:36 pm
Âèäû âåíòèëÿöèîííîãî îáîðóäîâàíèÿ…
Ñèñòåìû âåíòèëÿöèè…
February 15th, 2010 at 11:25 am
Ãîðîä Ñèäå ðàñïîëîæåí íà ïîëóîñòðîâå â 75 êì îò Àíòàëüè…
Îòåëè ãîðîäà Ñèäå…
February 16th, 2010 at 5:52 am
Ãîà íàõîäèòñÿ íà çàïàäå Èíäèè…
Ìóçûêà, òàíöû, ïðèêëàäíîå è óñòíîå òâîð÷åñòâî ãëóáîêèìè êîðíÿìè óõîäÿò â äóøó Ãîà, à ðèòìû ïóëüñèðóþò â ñåðäöàõ åãî æèòåëåé…
February 17th, 2010 at 11:09 am
Êëàññèôèêàöèÿ è íàçíà÷åíèå êàáåëåé…
Ýëåêòðîêàáåëè…
February 18th, 2010 at 2:04 pm
Îòåëè Àëàíèè…
Êóðîðòû Òóðöèè…
February 19th, 2010 at 11:41 pm
Ïèëîðàìû…
Áð¸âíîïèëüíûå äèñêîâûå ñòàíêè…
February 22nd, 2010 at 1:31 am
Ïàðèæ - ñòîëèöà Ôðàíöèè…
Ïðîâåäèòå îòïóñê âî Ôðàíöèè…
February 22nd, 2010 at 3:57 pm
Ïðàãà - Ãîðîä ñîòíè øïèëåé…
Ïðàãà - ñòîëèöà ×åõèè…
February 23rd, 2010 at 1:43 pm
Êàíàðñêèå îñòðîâà…
Âàëåíñèÿ…
February 24th, 2010 at 11:27 am
Ãèäðàâëè÷åñêèå íàñîñû…
Íàñîñû è ãèäðàâëè÷åñêîå îáîðóäîâàíèå…
February 25th, 2010 at 2:38 pm
ïíåâìîàâòîìàòèêà…
Ïðîìûøëåííîå èñïîëüçîâàíèå ïíåâìàòèêè íà÷àëîñü áîëåå ñòà ëåò íàçàä…
February 26th, 2010 at 4:09 pm
Ìåêñèêà âîïëîùåíèå èäåàëüíîãî òóðèñòè÷åñêîãî íàïðàâëåíèÿ…
Ìåêñèêà ðàñïîëàãàåò ïî-íàñòîÿùåìó óíèêàëüíûìè âîçìîæíîñòÿìè äëÿ âñåõ âèäîâ òóðèçìà…
February 27th, 2010 at 2:27 pm
Ìåäèöèíñêèå èçäåëèÿ…
Ìåäèöèíñêàÿ òåõíèêà…
March 1st, 2010 at 1:17 am
×åì òóðèñòîâ ïðèâëåêàåò Èñïàíèÿ…
5 äîâîäîâ çà îòäûõ â Èñïàíèè…
March 2nd, 2010 at 2:03 pm
Îáùàÿ èíôîðìàöèÿ î Òóíèñå…
Äîñòîïðèìå÷àòåëüíîñòè Òóíèñà…
March 2nd, 2010 at 9:00 pm
Îáùàÿ èíôîðìàöèÿ î ×åðíîãîðèè…
Äîñòîïðèìå÷àòåëüíîñòè ×åðíîãîðèè…
March 5th, 2010 at 12:39 am
Êëàññèôèêàöèÿ ñòàíêîâ è îáîðóäîâàíèÿ ïî ìåòàëëó…
Ìåòàëëîðåæóùèé ñòàíîê…
March 5th, 2010 at 12:22 pm
Ïóòåøåñòâèå â Òàéëàíä…
Âåëèêîëåïíûé îòäûõ â Òàéëàíäå…
March 7th, 2010 at 9:08 am
Óëüòðàçâóêîâîé íåðàçðóøàþùèé êîíòðîëü…
Óëüòðàçâóêîâûå ïðèáîðû…
March 12th, 2010 at 2:33 am
Òàõåîìåòðû ýëåêòðîííûå…
Òåîäîëèòû ýëåêòðîííûå…
March 14th, 2010 at 3:22 am
Êîìïüþòåðû äëÿ ìîíòàæà â ïàíåëè óïðàâëåíèÿ…
Îäíîïëàòíûå ïðîìûøëåííûå êîìïüþòåðû…
March 15th, 2010 at 1:34 am
Ëó÷øèå ïëÿæè Þæíî-Êèòàéñêîãî ìîðÿ…
Âüåòíàì - ñòðàíà ñ äðåâíåéøåé èñòîðèåé è êóëüòóðîé…
March 16th, 2010 at 8:42 am
Îáîðóäîâàíèå ìåëüíè÷íî-ýëåâàòîðíîå è êðóïÿíîå…
Îáîðóäîâàíèå äëÿ ìàñëîæèðîâîé ïðîìûøëåííîñòè…
March 17th, 2010 at 5:34 am
Âûäóâíîå îáîðóäîâàíèå…
Ýòèêåòèðîâî÷íîå îáîðóäîâàíèå…
March 18th, 2010 at 6:14 am
Èíôîðìàöèÿ î Êèòàå…
Èíôîðìàöèÿ î ßïîíèè…
March 19th, 2010 at 7:05 am
Êðèò - ñàìûé áîëüøîé îñòðîâ Ãðåöèè…
Îñòðîâ Êðèò - ýòî äðàãîöåííàÿ ÷àñòü èñòèííî ãðå÷åñêîé çåìëè…
March 20th, 2010 at 2:36 am
Âåñû ïðîñòîãî âçâåøèâàíèÿ…
Òîðãîâûå âåñû…
March 23rd, 2010 at 5:40 am
Òîêàðíûå, ñâåðëèëüíûå, øëèôîâàëüíûå è çàòî÷íûå ñòàíêèü…
Îñîáåííîñòè òîêàðíûõ ñòàíêîâ ñ ×ÏÓ…
March 24th, 2010 at 8:44 am
Îòåëè Àâñòðèè: Âåíà, Çààëüáàõ, Çàëüöáóðã, Çîëüäåí, Èøãëü…
Âåíà - ãîðîä ðîñêîøíûõ äâîðöîâ, âåëè÷åñòâåííûõ ïëîùàäåé, æèâîïèñíûõ óëî÷åê…
March 25th, 2010 at 5:59 am
Îáîðóäîâàíèå äëÿ ìîíòàæà ñòàëüíûõ òðóá…
Èíñòðóìåíò äëÿ ïðåññ-ôèòèíãà…
March 26th, 2010 at 5:36 am
Êîíòðîëüíî-èçìåðèòåëüíûå ïðèáîðû Yokogawa…
Àíàëèçàòîðû Yokogawa…
April 11th, 2010 at 9:30 pm
Актуально. Вы мне не подскажете, где я могу найти больше информации по этому вопросу?…
ассистент в отдел маркетинга I […….
May 19th, 2010 at 4:17 am
больше никак это не назовёшь!…
различных видов транспорта В их обязаности также I […….
July 20th, 2010 at 10:59 am
< blockquote >< a href=”http://medicamentspot.com/”>MedicamentSpot.com. Canadian Health&Care.No prescription online pharmacy.Special Internet Prices.Best quality drugs. No prescription pills. Order drugs online< /a >…
Buy:Zyban.Prednisolone.Lumigan.Valtrex.Retin-A.Actos.Mega Hoodia.Zovirax.100% Pure Okinawan Coral Calcium.Arimidex.Synthroid.Petcam (Metacam) Oral Suspension.Accutane.Nexium.Prevacid.Human Growth Hormone….