- Federal Housing Finance Agency Invites Comment on Proposed Ban of Force-Placed Insurance Commissions, Reinsurance Fees
- April 3, 2013
- Law Firm: Colodny Fass Talenfeld Karlinsky Abate Webb P.A. - Fort Lauderdale Office
In a March 25, 2013 notice inviting comment on proposed policy it called "contrary to prudent business practice," the Federal Housing Finance Agency ("FHFA") is proposing a ban of force-placed insurance commissions and reinsurance fees to banks on loans backed by Fannie Mae and Freddie Mac ("the Enterprises").
Congresswoman Maxine Waters, ranking Member of the U.S. House of Representatives' Committee on Financial Services, had expressed strong concerns about mortgage servicers and banks benefitting from the ability to benefit at borrowers' and taxpayers' expense from financial relationships with insurers.
"The proposed change in the FHFA's policy will benefit consumers who pay dearly for insurance that is artificially inflated because of cozy financial relationships between banks and insurers," Congresswoman Waters said of today's developments. "The current practice is deeply wrong and I appreciate the fact that the FHFA is finally yielding to legitimate concerns about abuses in this market. I urge Mr. DeMarco to make up for lost time and prevent further losses to borrowers and taxpayers by moving forward with these proposed reforms as quickly as possible."
Specifically, the proposed restrictions are:
- Certain Sales Commissions. The Enterprises shall prohibit sellers and servicers from receiving, directly or indirectly, remuneration associated with placing coverage with or maintaining placement with particular insurance providers.
- Certain Reinsurance Activities. The Enterprises shall prohibit sellers and servicers from receiving, directly or indirectly, remuneration associated with an insurance provider ceding premiums to a reinsurer that is owned by, affiliated with or controlled by the sellers or servicer.
Within 60 days of the notice as it will be published in the Federal Register, the FHFA invites input from any person with views on the planned practice limitations set forth above. The FHFA is also inviting input on enhancing the transparency and consumer and investor protections related to lender-placed insurance, as well as regarding other practices that may operate to the detriment of the Enterprises operating in conservatorships. Further, the FHFA is interested in whether there is data or information that would run contrary to the intended results it is seeking. Finally, the FHFA is interested in the amount of time and difficulties associated with altering contracts among contractors and Enterprise servicers as would result from the planned approach.
To submit comments online, go to www.Regulations.gov and search under "newly posted" to find the comment form for this notice. As of the date and time of this publication, the notice has not yet been posted on the Federal Register.