New York's Department of Financial Services has issued a statewide ban on force-placed insurance payments to banks after reaching an agreement with some specialty insurers. The four carriers that entered into the agreement include American Modern Insurance, Chubb, Fidelity and Deposit Company of Maryland, and FinSecure. They agree to avoid making any payments to banks or providing them with any free or discounted services. New York is now the first state to block kickbacks that allegedly drove homeowners into foreclosure, according to consumer advocates. Force-placed insurance is back-up coverage meant to protect mortgage investors when homeowners allow their property insurance lapse, but critics say that it has led to "reverse competition" that encourages banks and insurers to work together to inflate the price of the insurance and then share the profits.
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