New York state’s top banking regulator is questioning whether subprime loan servicer Ocwen Group is enriching itself through an insurance program, potentially at the expense of at-risk homeowners.
Department of Financial Services superintendent Benjamin Lawsky sent a letter to Ocwen regarding an arrangement brokered by its affiliate, Altisource, to provide a type of homeowner coverage called force-placed insurance, Reuters reported. Banks and lenders often take out force-placed policies on properties that lack coverage or are insufficiently covered, according to the news agency.
Since premiums are passed on to homeowners, Lawsky worries that it’s in Ocwen’s interest to choose force-placed insurance with high premiums, which could push borrowers who are already on the brink into foreclosure.
“Ocwen hired Altisource to design Ocwen’s new force-placed program with the expectation and intent that Altisource would use this opportunity to steer profits to itself,” Lawsky said in a letter cited by Bloomberg News.