The Federal Housing Finance Agency (FHFA) has filed a notice that is designed to put an end to fees and commissions associated with lender-placed insurance.
‘Protection of property values is important to homeowners, communities and to the enterprises,’ says the FHFA in its notice filing. ‘At the same time, provision of such insurance products at an appropriate cost is of concern as well. Reportedly, premiums for lender-placed insurance are generally double those for voluntary insurance and, in certain instances, significantly higher.
‘FHFA recognizes that some greater risks are involved with lender-placed insurance and that lender placed insurance carriers do not have the opportunity to underwrite the properties they insure,’ the agency continues. ‘However, the multiples involved may not reflect claims experience and other measures. Loss ratios for lender-placed insurance are significantly below those for voluntary hazard insurance, and some states already have required or have considered rate reductions of 30 percent or more.’
The FHFA believes that prohibiting the fees and commissions associated with this product could ultimately lower the overall price of insurance. The FHFA will seek comments on its notice for the next 60 days.