The North Dakota Department of Financial Institutions joined financial regulators from 48 agencies across 47 states in reaching a $15.5 million settlement with NewRez LLC, one of the nation’s largest mortgage servicers, over the company’s improper use of force-placed insurance on borrowers who already had active homeowners insurance policies.
The settlement, announced Wednesday and coordinated by the Conference of State Bank Supervisors, resolves findings from a multistate examination that NewRez had imposed force-placed insurance on more than 4,200 borrowers nationwide whose existing homeowners policies were still active, causing $4.5 million in consumer harm.
NewRez, a Fort Washington, Pa.-based mortgage servicer owned by Rithm Capital, self-identified the problem and proactively paid $4.5 million in restitution to affected borrowers before the settlement was finalized. Under the terms of the agreement, the company will also pay $9.9 million in administrative penalties and approximately $1.1 million in costs to be distributed among the participating state regulators. NewRez is further required to implement new controls and conduct enhanced monitoring for loans with force-placed insurance, with an obligation to report to a state regulator executive committee if error rates exceed 5% during monitoring.
“The penalties and enhanced monitoring requirements underscore the importance of meeting state requirements to protect consumers,” said NDDFI Commissioner Lise Kruse. “Participating in these types of multi-state regulatory efforts illustrates the important role DFI plays in protecting the rights of North Dakota residents.”
Force-placed insurance is a policy purchased by a lender or servicer when a homeowner’s coverage lapses, is cancelled or is deemed insufficient, and the borrower fails to secure replacement coverage. Lenders use it to protect their financial interest in the property, but the coverage typically costs significantly more than a policy a consumer would purchase independently.
The District of Columbia led the enforcement team, with assistance from Arkansas, Iowa, Massachusetts and Montana. Washington state did not participate in the multistate settlement, instead pursuing a separate enforcement action against NewRez over what it described as more extensive alleged violations of state law.
North Dakota residents with questions about the enforcement action can contact NDDFI Deputy of Non-Depository Division Jan Murtha at jjkmurtha@nd.gov or call (701) 328-9933.