The New York State Department of Financial Services has subpoenaed 31 banks and financial institutions to investigate the overlap between banking and insurance. This investigation may result in more force-placed insurance lawsuits against banks and insurance companies. In the meantime, consumers should learn more about what to do in the case of flood insurance fraud. Here are the top questions to consider:
First Tennessee
The flooding in Humphreys County, Tennessee, killed at least 20 people last weekend and served as a case study for the difficulties of protecting people from explosive rainstorms as climate change worsens. The disaster exposed many residents to flooding beyond their level of protection, and it was made worse by decisions made by the government. The lawsuit alleges that the government left residents exposed to dangerous flooding because they were not properly informed about the consequences of climate change and inadequate flood insurance.
The lawsuit alleges that U.S. Bank, through its subsidiaries, abused its FHA-insured mortgage insurance rights by charging mortgage holders for lender-placed flood insurance. Under FHA law, a lender has the right to force-place flood insurance on a home located in a Special Flood Hazard Area even if the borrower fails to carry flood insurance. The plaintiffs allege that the bank abused its flood insurance right by buying backdated policies and arranging kickbacks, qualified expense reimbursements, and other compensation for itself.
JPMorgan Chase
The banks are facing a class action lawsuit in which they are accused of forcing homeowners to buy flood insurance that they did not need and did not require. The banks allegedly did this by paying mortgage lenders kickbacks that forced them to purchase flood insurance. The settlement was approved by the United States District Court for the Northern District of California on Tuesday. The attorneys representing the plaintiffs have concluded that the settlement is fair and adequate.
Plaintiffs alleged that the bank forced homeowners to purchase more flood insurance than required by federal regulations and actual lenders. In addition to forcing homeowners to purchase more flood insurance than was required, they also said that the bank improperly profited from the force-placed insurance policies. Some claimants argued that force-placed flood insurance is up to 10 times more expensive than alternative coverage.
MetLife
A class-action lawsuit has been filed against MetLife for its illegal practice of forcing flood insurance on homeowners. The lawsuit alleges that MetLife misled homeowners and required them to purchase flood insurance that is too expensive. The suit is against the bank MetLife, a subsidiary of MetLife Inc., which sold First Horizon’s mortgage origination business in 2008. The lawsuit alleges that MetLife acted unreasonably and inflated flood insurance rates by requiring homeowners to purchase overly expensive flood insurance.
