Assurant Inc., the insurer of foreclosed properties, fell the most in 18 months after an American Banker article cited “evidence of abuses” in the market for so-called force-placed coverage.
Assurant dropped $3.94, or 9.8 percent, to $36.20 at 12:23 p.m. in New York Stock Exchange composite trading.
Mortgage servicers are profiting at the expense of homeowners and investors by taking payments from the insurers they select to issue force-placed policies on properties where distressed borrowers allow their original coverage to lapse, American Banker said. The force-placed policies can cost 10 times as much as the coverage they replace, the newspaper said.
EverBank Financial Corp. received a $7,100 commission from New York-based Assurant for contracting the insurer to issue coverage on a borrower’s property, American Banker said. That’s more than the bank would make servicing the loan, according to the newspaper.
“Lender-placed insurance programs are regulated in all states and we comply with those regulations,” the American Banker article quotes Assurant as saying in a statement. “We believe our rates to be among the lowest in the industry.”
Vera Carley, a spokeswoman for Assurant, had no immediate comment when contacted by Bloomberg.
Borrowers get “several notices” before force-placed coverage is issued, said Justine Navaja, a spokeswoman for EverBank. She declined to comment on commissions.
Assurant competes with Bank of America Corp., Munich Re and Australia’s QBE Insurance Group Ltd. for sales of force-placed coverage. The policies are riskier than typical home coverage because the properties are more prone to neglect or vandalism.
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