Righting the Wrongs in Force-Placed Insurance Cases in the Housing Market

AuthorDennis J. Wall
This chapter introduces all the remaining chapters that address what
has been done and what can be done to keep force-placed insurance
business practices within limits. Federal agencies and courts have been
busy addressing LFPI practices and often overlooking them, making them
easier, or placing limits on them. This chapter is a brief summary of those
efforts and their sometimes surprising results, a summary that reveals why
more remains to be done before lender force-placed insurance practices
in general give money lending a bad name.
4.1 Where We Are Now
Since the earliest residential mortgage lender force-placed insurance (LFPI)
cases were led beginning in about 2007, much has happened. Lawsuits
have been led and litigated, but none has gone to trial yet.
Some existing
statutes have been amended, and new statutes have been enacted.2 These
topics are addressed in other chapters of this book, however.
In this chapter, we look at some of the effects on LFPI cases of actions
taken by Congress and by administrative agencies. Some of the congressional
Chapter 4
Righting the Wrongs in Force-
Placed Insurance Cases
in the Housing Market
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and administrative actions to be discussed here have previously been publi-
cized, but in most cases, they are made public here for the rst time.
In the nal section of this chapter, we take a longer look at the National
Mortgage Settlement, which included a settlement of certain lender force-
placed insurance practices as well as some unusual provisions. Some of
the more unusual features of the National Mortgage Settlement include an
agreement merely to “term-limit” some business practices, and the agreement
of the ve investment banks that settled to be bound by their agreement
but probably not to rein in the independent mortgage servicers to which
the investment banks sold their mortgage servicing book of business. These
and other previously unseen features of the National Mortgage Settlement
conclude this discussion.
4.2 Federal Agencies and the Business of Force-
Placed Insurance: Roles Played by the Consumer
Financial Protection Bureau, Freddie Mac and Fannie
Mae, and the Federal Housing Finance Agency
Congress has taken action since the abuses associated with lender force-
placed insurance practices came to public attention. It enacted the
Dodd-Frank Act, which contained many amendments and new statutory
provisions in this area. Some sections of the Dodd-Frank Act have provided
new claims or reinforced previously existing statutory claims, while others
have provided a possible new defense of immunity.
The statutory changes include amendments aside from the Dodd-Frank
Act. The statutes changed by Congress in light of the abuses that have come
to light in lender residential mortgage force-placed insurance situations
include the Real Estate Settlement Procedures Act (RESPA), the Truth in
Lending Act (TILA), and the National Flood Insurance Act (NFIA). For the
most part, these changes have not yet found their way into courtrooms for
judges to examine in litigation. The statutory changes that have received
judicial attention are examined in detail later in this book.3
Congress entrusted the new Consumer Financial Protection Bureau (CFPB)
with the chief responsibility to issue rules, regulations, and interpretations
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