The Federal Housing Finance Agency (FHFA) is considering suing
banks and other mortgage servicers for over-charging
) on force-placed insurance. Per the report of the FHFA's Office of
Inspector General, the excessive fees had subsequently resulted in
extra charges of nearly $158 million in 2012 alone.
Further, several lawsuits along with the investigations carried out
by the New York's Department of Financial Services in 2012,
surfaced the fact that major banks had colluded with insurers to
raise the prices of force-placed insurance. The gain from the
inflated price was then shared between the two.
The probes also revealed that the banks including
JPMorgan Chase & Co.
Wells Fargo & Company
) set up separate insurance agencies to accept commissions from the
two main insurers,
) and QBE Holdings, a unit of Australian insurer QBE Insurance
Nevertheless, the FHFA will decide about the filing of lawsuits
within the next 12 months. In case the regulatory body decides to
press charges, the chances of winning are high.
Over the last few years, many class-action lawsuits with similar
charges have been settled by several banks including
Bank of America Corporation
), JPMorgan, Wells Fargo and
HSBC Holdings plc
). These settlements have enabled a recoup of approximately $674
Although force-placed insurance has been banned by the FHFA since
June this year, we believe that allegations similar to the one
mentioned above will likely continue cropping up. However, in the
event of long-drawn legal procedures, it would not be worthwhile
for the FHFA to file lawsuits against the banks.
Though the names of the faulty financial institutions have not been
revealed, big names like the afore-mentioned ones are expected in
the list. With the banks already facing considerable litigation
headwinds, these lawsuits would further dent their
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