R Lee Bennett
Aug 20, 2015
My perception of reasonableness changed dramatically on reading Mr. Wall’s fine exposé.
I have seen numerous mortgages, security agreements, and several commercial contracts that stipulate that if the borrower fails to provide and keep in force an insurance policy or policies in the amounts specified, the lender can purchase such insurance and charge the premiums to the defaulting party. Sounds reasonable enough. A Lender ought to be protected if the borrower does not provide the required insurance.
In "Lender Force-Placed Insurance Practices," Mr. Wall documents the abuses perpetuated by Lenders, servicing agents, and insurance companies on hapless and impecunious borrowers. Force-placed insurance comes with low risk and high premium cost for the insurers (often subsidiaries formed for this purpose), who are happy to pay commissions and kick-backs to the policy originators.
It would seem Lenders could take an assignment of a lapsing policy and continue the premiums, but that is not what happens. If the Lender took that very reasonable approach, significant dollars would be left on the table under current force-placed insurance practices. This very useful book finishes by raising and exploring possible alternatives to the current system of lender force-placed insurance practices.
Read this book. You will learn much useful information that can be put into practice.
R. Lee Bennett