Bankster's Score Big Win In Effort To Perpetuate Force-Placed Insurance Racket; Plan To Save Financially Strapped Homeowners As Much As $300M/Year Squelched By FHFA

American Banker reports:

• The Federal Housing Finance Agency has killed a plan to slash premiums for replacement homeowners insurance on Fannie Mae loans, according to people informed of the agency's decision.
  
  The FHFA, which is the conservator of the government-sponsored enterprise, announced its decision Monday on a conference call with Fannie Mae staff and mortgage industry trade groups.
  
  The regulator's move will block a plan that was expected to save Fannie and homeowners as much as $300 million a year, according to people familiar with it. The plan would have supplied homeowners with low-cost housing insurance from Fannie's own vendors and prevented banks from collecting payments for steering business to "forced-placed" insurance carriers.
  
  Force-placed insurance is hazard insurance purchased when struggling mortgage borrowers fail to maintain coverage on their own homes. It has become increasingly controversial in recent years as state regulators and consumer advocates have uncovered a pattern of alleged kickbacks from insurers to the banks who buy it.
  
  Fannie's plan represented the largest threat to the current structure of the industry, and had drawn criticism from mortgage and insurance industry trade groups over the past few months.

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• The FHFA's move is a coup for a coalition of mortgage industry trade groups that have lobbied extensively against Fannie's plan. Shortly after the markets opened on Tuesday morning, the stock price of Assurant (AIZ), the leading force-placed insurer, rose by 5%.
  
  In a research note, analysts at Compass Point called the FHFA decision "a decisive positive for force-placed insurance providers and brokers."

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• At first blush, the FHFA's move appears to end the single most significant regulatory threat to the force-placed insurance industry, which has been the subject of significant controversy over the last few years. American Banker has reported that the insurers provide sizable commissions to banks that give them business.

For the story, see FHFA Kills Fannie Mae Force-Placed Insurance Plan.

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