FHFA to Hold Private Hearings on Force-Placed Insurance

June 10, 2013
American Banker 
mortgage lending news

The Federal Housing Finance Agency (FHFA) will hold private hearings on June 13-14 to discuss force-placed insurance. Only such "stakeholders" as big banks, insurers, insurance brokers, regulators, and trade and consumer group representatives can attend the meetings. Representatives from Fannie Mae -- whose plan to reduce the cost of force-placed insurance was rejected by the FHFA -- can attend the meetings but cannot speak or ask questions, according to sources. Alfred Pollard, FHFA general counsel, calls the meetings "an information gathering and fact finding endeavor." Fannie Mae, state regulators, and plaintiffs' attorneys have complained in recent years about pay-to-play kickback schemes in force-placed insurance, which is coverage purchased by banks when borrowers allow their conventional property insurance policies to lapse, with homeowners and investors shouldering the costs. These alleged kickback schemes are said to boost the cost of force-placed coverage. Such payments were banned in New York, and Florida regulators have made their concerns known. However, the FHFA could have significant power over large banks' force-placed practices, given its regulatory authority over Fannie Mae and Freddie Mac.
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