New York, NYThe law firm of Kirby McInerney LLP announced today that it is investigating potential class action claims against American Home Mortgage Servicing, Inc. ("American Home") in connection with a scheme to improperly inflate the cost of force-placed hazard insurance charged to borrowers.
To protect the lender's interest in secured property, mortgage loan contracts require the borrower to maintain specified levels of hazard insurance. If the borrower's coverage lapses, the lender is entitled to purchase coverage for the home, "force place" it, and be reimbursed by the borrower for the cost.
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Kirby McInerney is investigating whether American Home has procured kickbacks from its force-placed insurance providers in connection with the mortgage loans in its servicing portfolios. The New York State Department of Financial Services ("NYSDFS") is conducting an investigation of improper practices relating to force-placed insurance. NYSDFS issued requests for information to American Home in connection with its investigation. American Home admitted in testimony to NYSDFS that it receives "commission" payments from its force-placed insurance providers amounting to tens of millions of dollars.
Kirby McInerney's investigation of American Home follows the law firm's recent filing, in the United States District Court for the Southern District of New York, of a class action lawsuit alleging similar misconduct on the part of another loan servicer, GMAC Mortgage, LLC.
