With the hurricane season in the rearview mirror, most — if not all — Florida homeowners are wiping sweat from their brow. It is one less threat to their home that they have to worry about. But other homeowners may still be without or past due on their insurance policy.
Further still, some Floridians are looking at getting their own home in the near future. For these groups, a decision by Fannie Mae to investigate and change their “force-placed insurance” policies so that they are less expensive is welcome news.
When a prospective homeowner looks to obtain a mortgage, there is often a requirement that they secure homeowners insurance first. Usually the homeowner does not get to select which provider will be covering them nor do they get a say in terms, conditions or price of the policy.
This is called “forced-place insurance,” and these policies routinely have higher prices than normal policies because they are agreed to by the insurance provider and the lender. It can place a homeowner in a precarious situation where they are unable to keep up with their insurance bills or mortgage payments and more likely to enter foreclosure.
Fannie Mae recently announced that they will investigate the practice of “force-placed insurance” and look to change the gouging prices normally associated with the specialized policy. “Our goal is to reduce costs for Fannie Mae and thereby taxpayers, and to reduce a barrier for homeowners becoming current on their loans,” said a company spokesman.
Even with the announcement, officials from the Department of Financial Services in New York are still going to investigate the use of “force-placed insurance.”
Source: Reuters, “Fannie Mae changing ‘forced-place insurance’ rules,” Ben Berkowitz, Karen Freifeld and Margaret Chadbourn, Mar. 7, 2012Share