Forced-placed insurance fallout

Mortgage lenders generally require homeowners maintain insurance on their houses while the loan is still outstanding.

Force-placed insurance is hazard, fire, flood or other types of policies purchased by a mortgage lender for a property, at the borrower's expense, when a borrower does not maintain insurance premium payments. It serves as a type of backup insurance, if you will, if there is ever a problem with a policy.

However, many homeowners whose insurance had lapsed due to either oversight, a cancelation or financial hardship suddenly find that they are being billed for lender insurance services that are more costly and provide less coverage.

Regulators have been targeting several banks and insurers over the practice, saying that the institutions not only force homeowners into overpriced lender insurance, but also enter into kickback arrangements that further inflate the cost of those policies.

Reuters reports that JPMorgan and insurer Assurant have agreed to settle a lawsuit that alleged the companies collected more than $1 billion since 2008 from people forced into buying overpriced lender insurance.

Officials said that Assurant entered into agreements that let reinsurance companies owned by banks take as much as 75 percent of the profit for sharing risks.

There are several other similar lawsuits pending across the nation including ones against Citigroup, Bank of America, Wells Fargo and HSBC Bank USA.