The Real Deal Miami

Settlements for mortgage insurance kickbacks reach $39M in Florida, NJ

Mortgage companies allegedly forced borrowers to buy inflated policies from insurers that then funneled some of the money back
August 15, 2017 02:30PM

Miami and money 

A national class action suit accusing mortgage providers of taking kickbacks from residential insurers received preliminary approval in Miami last week for $15 million worth of settlements, bringing the total in similar cases to $39 million, according to the Daily Business Review.

The latest complaint alleges that the mortgage companies forced borrowers to buy inflated policies from insurers that then funneled back some of the money in the form of commissions, reimbursements and the provision of below-cost services.

Tens of thousands of borrowers were affected, according to the Daily Business Review. U.S. Magistrate Jonathan Goodman of the Southern District of Florida ruled borrowers will receive 6 percent to 10.5 percent of the premiums they were overcharged dating back from 2008.

The mortgage service companies include Carrington Mortgage Services LLC, Fay Servicing LLC and Residential Credit Solutions Inc. The insurers are American Modern Home Insurance Co. and Southwest Business Corp.

The agreement follows another force-placed insurance class action settlement in New Jersey worth nearly $24 million. Nearly 75,000 people were involved, according to the Daily Business Review. Force-placed insurance, which is not unusual, takes place when a lender requires a borrower to obtain insurance on property that secures a loan.

Loan modification schemes are common in the Southern District of South Florida. Adam Moskowitz, of Kozyak Tropin & Throckmorton in Coral Gables, told the Daily Business review that about 15 class action suits revolving around allegations of wrongdoing involving force-placed insurance were filed in the Southern District of Florida.

He and his team have worked on some notable cases here in South Florida, like a $217 million settlement with Ocwen Loan Servicing and Nationstar Mortgage in 2015. A final approval hearing is scheduled before Goodman in January.  [Daily Business Review]Amanda Rabines