The lender-placed insurance (LPI) market has been under fire over allegations of conflicts of interest and inappropriate business practices among some major mortgage lenders, servicers and insurance providers.
To address these concerns, the Cuomo Administration announced last Thursday that its force-placed insurance reforms – meant to crack down on kickbacks and payoffs and ensure lower rates – will now cover 100% of the New York market after reaching agreements with the remaining New York force-placed insurers that had not yet agreed to them.
Benjamin M. Lawsky, New York’s superintendent of financial services, has said that more can and should be done, and urged other regulators to implement New York’s reforms.
In March 2013, the FHFA announced its intent to end a number of the sales commissions and reinsurance activities that represent conflicts of interest between lenders/servicers and the GSEs, but industry professionals agree more needs to be done in order to right the problems, which include a lack of competition, overly inflated premiums and poor availability of information to track data.
“Ending inappropriate commissions and reinsurance arrangements alone will not produce the market pressures necessary to bring homeowners and taxpayers the saving they deserve,” said Tracey Carragher, CEO of Breckenridge Insurance Group. “We believe the solution for the LPI industry includes increased competition, greater transparency and allowing the GSEs to exercise control over their own portfolios.”
Breckenridge Insurance Group, parent company of lender-placed insurer OSC, submitted its official response last week to the FHFA’s call for public on lender-placed insurance, terms and conditions. The FHFA accepted public comment through May 28 and will now move forward on action with respect to sales commissions and reinsurance premiums.