| Attorney General Maura Healy announced yesterday that nation mortgage lender and servicer HSBC agreed to pay more than $4 million to resolve allegations it received commissions and kickbacks on force-placed insurance policies it procured for struggling Bay State homeowners.
As part of the agreement, HSBC will pay $2.675 million directly to the affected homeowners and another $1.4 million will be paid to the commonwealth.
“Mortgage servicers should not enrich themselves through insurance products at the expense of struggling homeowners,” Healey said in a press release. “This agreement ensures that HSBC returns the money to Massachusetts consumers it received in violation of state laws.”
Force-placed insurance is expensive property coverage mortgage servicers obtain on their customers’ properties when believe the property is underinsured. The customer is charged for the insurance and they are often already struggling financially.
Until June 1, 2012, HSBC received compensation that was tied to the force-placed insurance premiums charged to HSBC’s borrowers, which the AG’s office alleges created an improper conflict of interest and violated state consumer protection laws.
Under the terms of the settlement, HSBC agrees not to accept commissions, profit-sharing or reinsurance proceeds or any free or below market value services from insurance carriers that it uses to write force-placed insurance policies on Massachusetts borrowers’ properties in connection with such policies.
Earlier this month, Massachusetts was part of a $470 million joint state-federal settlement with HSBC to address mortgage origination, servicing and foreclosure abuses.
The Attorney General’s Office continues to review force-placed insurance practices. Consumers who have complaints or disputes relating to force-placed insurance or their mortgage are encouraged to file a complaint with the Attorney General’s Office. Consumers who have questions about the settlement or force-placed insurance can call the Attorney General’s Insurance Hotline at 1-888-830-6277, extension 3.
