JP Morgan Chase Forced-Place Mortgage Insurance Settlement

JPMorgan Chase and Assurant Inc. recently agreed to a $300 million settlement to resolve a class-action lawsuit filed in 2012 alleging homeowners were overcharged for controversial “forced-placed” mortgage insurance while Chase reaped millions in “kickback” style commissions that inflated the polices’ prices.

What is forced-place insurance? 

All mortgages require borrowers to maintain adequate homeowners insurance on their properties so that the lender’s interest is protected.  Typical mortgage agreements provide that if the homeowner’s policy lapses, or is deemed insufficient by the lender, then the lender can “force-place” a new policy. The lender pays the premium upfront and then charges the homeowner for it, usually by adding the cost to the balance of the mortgage.  Since forced-place insurance is typically more expensive than what homeowners can purchase on their own, this practice often causes already struggling borrowers to fall even further behind on payments and, in some cases, leads them into to foreclosure.

What happened in the JPMorgan Chase class action lawsuit? 

In the JPMorgan Chase class-action lawsuit, over 1.3 million homeowners sued Chase for force-placing mortgage insurance policies that were substantially above market-rates and earning fat commissions from the insurance companies in return.  According to the lawsuit, from 2008 to the present Chase forced-place more than $2.3 billion in insurance policies, netting the mortgage giant nearly $600 million in additional profits.

In the settlement JP Morgan Chase and Assurant agreed to refund or credit borrowers for 12.5% of the net premium for each policy covered in the settlement. Hundreds of thousands of homeowners who took out mortgages with JP Morgan Chase since 2008 are eligible for settlement money. Neither defendant admitted any liability.

More defendants to be sued over forced-placed mortgages

The JP Morgan and Assurant settlement is expected to have a domino effect on several other forced-placed mortgage insurance lawsuits. Earlier this year Assurant, Inc., was investigated by New York State investigation into its shady business practices of paying banks to force-place policies.  Reports surfaced that Assurant also entered into agreements with “reinsurance companies” owned by banks that placed the policies to take up to 75% of the policies’ profits.   National lawsuits are pending in Miami federal court (where the JP Morgan case was filed) against Citigroup, Wells Fargo, Bank of America and HSBC Bank.  Assurant and other insurance companies who contracted with banks in similar commission or reinsurance schemes, as well as a variety of mortgage servicers, may also face further litigation.

Consumer outrage has fueled not only a plethora of lawsuits, but also growing concern from government regulators. The Wall Street Journal recently reported that the Federal Housing Financing Agency is now seeking to legally ban certain mortgage servicers from accepting fees and other payments on forced-placed mortgages.  When the government conducts investigation and considers regulation, many view it as an indicator of widespread wrongdoing.   As a result, there may be many more claims and lawsuits filed seeking redress for borrowers.

How Do I Get More Information? 

If you purchased hazard insurance for your home, or believe your mortgage lender forced you to purchase it for your property, contact the attorneys at Audet and Partners, LLP to determine if you are eligible for compensation.  Call us at (800) 965-1461 or fill out the confidential case inquiry form on the right side of this page.

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