Wednesday, August 15, 2012

Some Banksters Use Threat Of Force Placed Insurance To Soak Homeowners Into Coughing Up Cash For Unnecessary Flood Coverage

In Lindstrom, Minnesota, the Star Tribune reports:

  • Thousands of homeowners in Minnesota and across the country are being pressured to buy flood insurance by their mortgage lenders, despite evidence showing that many of these homes are well outside danger zones.

    Though the federal government's new flood maps are more accurate than ever, state and local officials say lenders and their agents are making obvious mistakes in their interpretation of flood risk.

    Chisago County officials said they have intervened this year on behalf of 20 property owners who were wrongly classified as living in high-risk zones where flood insurance would be mandatory. Officials in Stearns and Washington counties also have taken steps to correct the record for dozens of homeowners who face minimal, if any, risk of flooding.

    "We're seeing too many problems," said Ceil Strauss, Minnesota's floodplain coordinator.

    In many cases, lenders are giving homeowners just 45 days to buy flood insurance or threatening to obtain it for them, often at exorbitant prices. Some homeowners have been told their premiums could run as high as $6,400 a year.
  • Under government pressure, banks stepped up their oversight. Legally, lenders could send borrowers in high-risk zones to the federal government's flood insurance program, where premiums are heavily discounted. Instead, banks began steering thousands of customers to private insurance companies where rates are usually two to three times higher, according to regulators.

    The deals are fraught with conflicts of interest, critics say. Not only are many lenders charging hefty commissions for these transactions, they often have ties to the insurance companies that issue the policies.
For more, see Lenders' mistakes cost homeowners on flood insurance (Mortgage lenders are misinterpreting new FEMA maps to require homeowners to buy expensive, unwanted coverage).

Thanks to Deontos for the heads-up on the story.

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