Page 2/2 March 18, 2011
Ties to Insurers Could Land Mortgage Servicers in More Trouble
Force-placed policies impose costs on both homeowner, investor
American Banker | Wednesday, November 10, 2010When banks buy insurance on the homes of borrowers whose policies have lapsed, they get a great deal. Just not forthe homeowners and investors who have to pay for it.Nominally purchased to protect the owners of mortgage-backed securities, such "force-placed" insurance can be 10times as costly as regular policies, raising struggling homeowners' debt loads, pushing them toward foreclosure — andworsening the loss to investors on each defaulted loan.Evidence of abuses and self-dealing in the force-placed insurance industry suggests that there may be far largerproblems in how servicers are handling distressed loans than the sloppy document recording that has been the recentfocus of industry woes.
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Bank of America Leak Exposes Alleged Force-Placed Insurance Fraud
OperationLeakS has now released the first batch of Bank of America (BAC
) fraud documents. What has beendisseminated so far consists mostly of emails between the hacker group Anonymous and a former employee atBalboa Insurance Co. which was acquired by BofA with its acquisition of Countrywide.
One thing to clear up about these documents is that they are NOT the same documents held by Wikileaks. Thedocuments just released by OperationLeakS Anonymous are mostly very recent emails and have nothing to dowith the executive hard drive held by Wikileaks. In fact, the Anonymous leaker says he would love to see what Wikileaks has and says he could probably get "all the dirt" within a week of gaining access to it.
So, what do the latest leaked emails reveal? The most obvious thing is that Balboa/BofA employees wereallegedly engaged in trying to hide original loan documents by erasing Document Tracking Numbers fromscanned documents. Seehere.
But the Balboa employee also appears to have information that would blow the lid off a number of alleged Force-Placed Insurance scams that are highly questionable, probably illegal and most likely would expose companies likeBank of America to more suits by mortgage-backed securities investors.
 10-05-05 Countrywide Bank of America NYSE BAC and its President Brian Moynihan Compilation of Records Evidence of Racketeering
 10-05-05 Chairs of US Congress Committees of the Judiciary and Banking Are Requested to Join Senator Feinstein's Inquiries on Comptroller of the Currency