WASHINGTON (Reuters) – A U.S. housing regulator said on Tuesday that it would ban some fees and commissions that borrowers are compelled to pay when their own home insurance coverage lapses.
The Federal Housing Finance Agency said it was aiming to shield homeowners from price-gouging on property coverage. The regulator, which oversees mortgage finance companies Fannie Mae and Freddie Mac, said the restrictions on the fees banks collect from insurers on so-called force-placed insurance would probably reduce costs for consumers.
All mortgages require homeowners to maintain insurance on their property. Most mortgages also allow the lender to purchase insurance for the home and force-place it if a policy lapses or borrowers stop paying their insurance bills.
Forced-placed policies were widespread during the recession, when delinquencies swelled and homeowners effectively stopped paying their insurance since premiums are often included in monthly mortgage payments.
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