Big banks face inquiry over home insurance

A New York State financial services agency is investigating several large banks to see whether they fraudulently steered homeowners into overpriced insurance policies, The New York Times reports. The investigation centers on so-called force-placed insurance that has become increasingly common since the downturn of the housing market began and homeowners had trouble keeping up with payments on their home insurance. JPMorgan Chase, Bank of America, Citigroup and Wells Fargo are among the major companies involved in the inquiry by the office of Benjamin M. Lawsky, the superintendent of New York State’s Department of Financial Services, according to a person briefed on the investigation who asked not to be identified because the matter was private. Lawsky’s office issued 31 subpoenas or other legal notices related to the case in early October, just as the state’s insurance and banking departments were merged under his new agency. His office has already turned up instances where mortgage servicing units at large banks steered distressed homeowners into insurance policies up to 10 times as costly as the homeowners’ original plans. In some cases, those policies were offered by affiliates of the banks themselves, raising questions about conflicts of interest; in other cases, there may have been kickbacks between unrelated companies, according to the person briefed on the investigation. Representatives of Citigroup and Wells Fargo say they are cooperating with the investigation. Bank of America says it cannot comment “on an active matter” but that it has a practice of cooperating with investigators. JPMorgan did not comment. Read the full story here, and the rest of the current Real Estate Weekly newsletter here.