“On the surface of it, most any reasonable person would understand that a mortgage lender has the right to protect its asset if the borrower is not adequately covered by homeowner’s or flood insurance policies. The controversy comes in when the lender purchases lender-placed (force-placed) insurance to do just that, protect their asset, but the cost, as alleged in the lawsuit mentioned in Garrison’s article involving HSBC and Assurant, Inc., is “unnecessary and onerous.”

This is precisely because it is perceived by many that the often accompanying “commission” or “revenue sharing” that is paid by the insurance carrier to the lender purchasing the insurance policy is a “kickback.”

To many in and out of our industry, the term “kickback” seems quite appropriate. It was a mostly unspoken term in the 1990s when I first learned of it while serving in the REO department at Great Western Bank, and it is much the same today.

Frankly, I have little understood why this practice has been allowed to continue over the past two decades, let alone following implementation of Dodd-Frank, and the creation of the Consumer Financial Protection Bureau.

If it looks like a duck, walks and swims like a duck, and quacks like a duck… it’s a DUCK — right?

While some may have a different perspective, say, those who offer these products, for example, it would be interesting to know just why they possess that different perspective.

According to Garrison, last year the CFPB published a five-point checklist for servicers on how to deal with force-placing insurance. This was long overdue, of course, but perhaps not enough to solve the ongoing problem.

“Steering” or “herding” consumers into more expensive insurance policies because the policies offered by specific firms might be superior to that which cost less would also seem reasonable, but, apparently, that is not necessarily the case with respect to the HSBC, Assurant lawsuit. That is why, according to Garrison, the agreement by these two companies to pay $1.8 million to put an end to a class action lawsuit would also mean that they would return about 90% of HSBC’s “commissions” to the customers/plaintiffs.”



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