If you have been asked to purchase flood insurance by Flagstar Bank, the bank has violated your rights as a customer. It sent a demand letter and several additional letters requiring proof of flood insurance. When you failed to provide proof of flood insurance, the bank purchased flood insurance for you and deducted the costs from your home equity account and mortgage balance. In other words, you are paying for a second policy even though you already have one. You must remember that if you lose your condominium and flood your basement, the National Flood Insurance Program will not cover the cost of your second flood insurance policy.
Forced-placed insurance lawsuits
Many homeowners have sued their financial institutions over their forced-placed flood insurance policies. The forced insurance policies have ruined many homeowners’ credit scores and forced them into foreclosure. Fortunately, some of these lawsuits are successful, and the financial institutions themselves are paying out millions of dollars in settlements. In this article, we’ll examine some of the most prominent cases and the resulting settlement amounts. Let’s look at some of them, and see if they are right for you.
One such lawsuit alleges that Flagstar Bank refused to accept its customers’ flood insurance policies and forced them to pay for an unnecessary flood insurance policy. Flagstar Bank was able to collect these funds by adding them to their mortgage balance or home equity account. The cost of the flood insurance was subsequently added to the mortgage balance or deducted from the homeowner’s home equity account. In essence, the customer was paying for a second insurance policy without a flood insurance need. Moreover, the National Flood Insurance Program won’t pay twice for a flood loss in a condominium.
Cost of force-placed insurance
The cost of a Flagstar Bank force-placed flood insurance case can be high. Banks have a history of forcing homeowners to buy forced-placed insurance policies. These policies are often inferior to those that homeowners purchase on their own. In addition to overcharging homeowners, force-placed insurance provides less coverage. A recent lawsuit against Wells Fargo and JP Morgan Chase awarded a $25 million settlement to those who purchased flood insurance through the bank.
This homeowner was charged $4,491 annually for a forced-placed flood insurance policy, despite the fact that she already had the appropriate flood insurance coverage. The policy was twice as expensive as a voluntary policy. The fees added up to her monthly mortgage payment and ultimately caused her to lose her home. Flagstar Bank and M&T are now being sued for the cost of the force-placed flood insurance policy.
The Bank of America (Flagstar) is facing a class-action lawsuit filed by homeowners who believe the bank force-placed flood insurance on them. In January and September of 2021, the bank originated $40 billion in mortgage loans, an increase of 11.4% over the previous year. At the end of the third quarter of 2021, the bank had $41.7 billion in owned mortgage servicing, down 10% from the same period last year. This means that homeowners who purchased flood insurance before the mortgage was signed are now paying for an insurance policy that has no value.
The Court has ruled in two cases that the banks are liable for the forced flood insurance. In Medrano v. Flagstar Bank, the 9th Circuit upheld the bank’s dismissal of a RESPA QWR lawsuit. The bank argued that the plaintiffs’ requests to the servicer were for loan origination issues, which aren’t covered under QWR.
Courts that have ruled on the case
The OCC has ruled that Flagstar Bank violated the Federal Flood Act by forcing homeowners to pay for flood insurance they already had. The bank was required to provide homeowners with a flood insurance notice and force them to purchase it if they failed to do so within 45 days. At the end of September 2021, Flagstar had originated more than $40 billion in mortgage loans, an increase of 11.4% year over year. The bank’s owned mortgage servicing totaled $41.7 billion, a decrease of 10% from the same time period in 2020.
Danoses’s complaint sought actual damages and punitive damages, as well as further relief. The plaintiff presented evidence of a deed of trust, real estate contract, and seller’s disclosure statement, as well as photographs of the damage to the home. However, Danoses’ complaint failed to establish a connection between the mortgages and the flood insurance policies.