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Force-Placed Insurance: The Lending Industry's "Dirty Little Secret", Dana Cronkite

Chicago-Kent Law Review

Force-placed insurance, also called lender-placed insurance, is the insurance policy mortgage lenders obtain on behalf of borrowers when borrowers fail to maintain hazard insurance on their homes. Although the possibility of force-placed insurance is contemplated by mortgage contracts, the policies often provide little coverage and are much costlier than insurance policies acquired on the open market. Lenders obtain the policies at unfairly high prices and sometimes receive kickbacks from the force-placed insurance companies, while borrowers alone bear the burden of paying for them. As such, lenders have no incentive to obtain force-placed insurance at fair prices with adequate coverage. The …