Newrez reaches $15.5M multistate settlement over force-placed insurance

A $15.5 million settlement has been reached between Newrez, one of the largest mortgage lender-servicers in the U.S., and financial regulators from 47 states.

Newrez, headquartered in Fort Washington, Penn., was accused of improperly imposing force-placed insurance costs on more than 4,200 borrowers who already had active homeowners insurance policies.

Force-placed insurance is coverage a lender or loan servicer can purchase when a homeowners insurance policy lapses, is insufficient or is not maintained and the borrower doesn’t replace the coverage. It protects the lender’s financial interest in the property but is typically much more expensive than when consumers independently get their own insurance.

According to a press release from the Conference of State Bank Supervisors (CSBS), Newrez worked with state regulators “to self-identify and proactively remediate more than $4.5 million to the impacted borrowers, and it will pay nearly an additional $11 million for costs and penalties.”

Under the settlement, the company also will be required to implement and conduct enhanced monitoring for loans that have force-placed insurance.

Newrez told Scotsman Guide it is “pleased to resolve this matter” with the CSBS’s regulatory body, “which relates to issues identified several years ago that have since been addressed, including through remediation provided to affected borrowers.”

The company said it cooperated at all times with the investigation, put in place enhanced and forward-looking measures to address potential regulatory or consumer concerns and “appreciates the engagement and collaboration with its regulatory partners throughout this matter.”

The New York State Department of Financial Services reported the company had returned $409,026 to impacted consumers and will also pay a $602,226 penalty.

“The Department is committed to protecting consumers and holding institutions accountable for their responsibilities to New Yorkers,” said Acting Superintendent Kaitlin Asrow. “I thank our partner agencies from across the nation for working with us on this multistate enforcement action.”

The enforcement team was led by the District of Columbia, with the assistance of agencies in Arkansas, Iowa, Massachusetts and Montana.

Arkansas Securities Department Commissioner Susannah Marshall said in a press release that the settlement holds Newrez “accountable for harm done to Arkansas homeowners and requires a change in behavior.”

“As insurance prices continue to rise, servicers must implement effective procedures to ensure borrowers are not subjected to unnecessary or additional fees,” Marshall added.

Force-placed insurance litigation is not entirely over for Newrez, however.

The Washington State Department of Financial Institutions (DFI) told Scotsman Guide it did not participate in the multistate settlement because it has a separate statement of charges pending “regarding the forced-placed insurance issue and significant other alleged violations of Washington state law.”

In April, the Washington state regulator announced charges against Newrez, alleging “numerous repeat violations of the law between 2021-2026” and seeking a fine of $4.175 million.

“Washington homeowners rely on licensed mortgage servicers to correctly service their loans,” Washington DFI Director Charlie Clark said when the charges were announced, “and we will hold companies accountable when they put consumers at risk of losing their homes or when they financially harm consumers.”