Newrez Agrees to $15.5M Settlement Over Forced-Place Insurance

Mortgage servicer Newrez has agreed to a $15.5 million settlement to resolve a multistate examination that found the company improperly charged some borrowers for lender-placed insurance, even when those borrowers had existing homeowners insurance. The settlement agreement, finalized on Wednesday, was reached with mortgage regulators from 46 states and the District of Columbia. This resolution includes $9.9 million designated as administrative penalties, $1.09 million allocated for administrative costs, and $4.51 million intended for consumer relief, a portion of which Newrez has already disbursed. The New York State Department of Financial Services announced that Newrez has returned $409,026 to affected New York borrowers and will pay a separate penalty of $602,226 to the state. Acting Superintendent Kaitlin Asrow of the New York Department of Financial Services stated that the department is dedicated to consumer protection and holding institutions accountable for their obligations to New Yorkers, acknowledging the collaborative effort of partner agencies nationwide in this multistate enforcement action. The examination, which commenced in January 2022, scrutinized Newrez’s mortgage servicing operations between November 1, 2020, and October 31, 2021. During this period, regulators identified instances where Newrez failed to comply with requirements set forth by the Real Estate Settlement Procedures Act (RESPA) and Regulation X, specifically concerning the implementation and charging of lender-placed insurance. Lender-placed insurance, also referred to as force-placed insurance, is a type of insurance policy that a mortgage lender can obtain on behalf of a borrower when the borrower's own homeowners insurance policy lapses or is insufficient to cover the lender's interest in the property. This insurance is typically more expensive than standard homeowners insurance. Newrez expressed satisfaction with resolving the matter with the Mortgage Markets Committee (MMC), noting that the issues identified occurred several years prior and have since been addressed, including through remediation efforts for affected borrowers. The company emphasized its full cooperation with the investigation and the implementation of enhanced, forward-looking measures to proactively address potential regulatory or consumer concerns. Newrez also highlighted its commitment to maintaining high service standards for homeowners and partners. The settlement addresses allegations that Newrez continued to charge borrowers for force-placed insurance even after receiving proof of their own active homeowners insurance policies, leading to duplicate or unnecessary insurance costs for consumers.