Little Rock, Arkansas – Arkansas is among 49 states that have reached a $15.5 million settlement with a mortgage services company over allegations involving force-placed insurance on homeowners who already had active insurance coverage, state securities officials announced Wednesday.
NewRez LLC, which does business as Shellpoint Mortgage Services and is based in Fort Washington, Pennsylvania, agreed to the settlement following a multistate examination by state regulators. The investigation focused on the company’s handling of insurance placed on properties when borrowers were believed to lack adequate coverage.
According to officials, regulators found that NewRez improperly placed force-placed insurance on more than 4,200 borrowers nationwide even though those homeowners already had active homeowner insurance policies.
The practice resulted in about $4.5 million in consumer harm, officials said. NewRez worked with regulators to identify the affected borrowers and provided $4.5 million in remediation. The company will also pay another $11 million in penalties and related costs under the settlement.
Force-placed insurance is a type of coverage that a lender or mortgage servicer may obtain when a homeowner’s insurance policy has been canceled, has expired because premiums were not paid, or does not provide enough coverage. It can also be purchased when a borrower fails to obtain replacement insurance after coverage ends.
The purpose of the coverage is to protect the lender’s financial interest in the property. However, officials noted that force-placed insurance generally costs substantially more than a homeowner policy purchased directly by the borrower.
That difference in cost can become significant for homeowners, particularly when insurance is added to mortgage-related expenses without the borrower realizing that their existing policy is still active.
“This settlement holds NewRez accountable for harm done to Arkansas homeowners and requires a change in behavior,” Securities Commissioner Susannah T. Marshall said. “As insurance prices continue to rise, servicers must implement effective procedures to ensure borrowers are not subjected to unnecessary or additional fees.”
The settlement involved regulators from across the country, with the District of Columbia leading the enforcement effort. Arkansas, Iowa, Massachusetts and Montana assisted with the investigation and enforcement process.
State officials said NewRez cooperated with regulators throughout the settlement. The agreement is intended not only to address the financial harm identified during the examination but also to require changes in the company’s practices.
For Arkansas homeowners, the case highlights the importance of keeping mortgage servicers informed when homeowners insurance is purchased, renewed or changed. Maintaining records of insurance coverage may also help borrowers address problems if a servicer later claims that coverage has lapsed or is insufficient.
Officials did not say how many Arkansas borrowers were affected by the conduct identified in the multistate examination. The $4.5 million remediation figure covers affected borrowers nationwide.
Arkansas residents who have questions about the enforcement action can contact the Arkansas Securities Department at 800-981-4429. Consumers can also use the department’s website for additional information about the case.
Homeowners can also visit NMLS Consumer Access to check whether a mortgage company or other financial services business is licensed to operate in Arkansas. The database also allows consumers to review past enforcement actions involving companies.
The settlement comes as homeowners in many parts of the country continue to face rising insurance costs. State regulators said the action serves as a warning to mortgage servicers that borrowers should not be charged for unnecessary insurance coverage when valid homeowner policies are already in place.
