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View Diary: Closely-Watched Court Decision Breaks Bad for Wall St. Has A Day of Reckoning Arrived? (154 comments)

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  •  What About Flagstar's Homeowner's Insurance Scams? (0+ / 0-)

    Flagstar also was an insurer. When issuing a mortgage, it would agree at closing to accept a borrower's homeowner's insurance benefit in the event the home was damaged or destroyed before the mortgage was paid off. But after the closing, Flagstar would notify the borrower that the benefit amount wasn't enough, under some contrived formula that wasn't presented or agreed at the closing, when contracts are signed. Flagstar would insist on selling the borrower its own insurance policy to cover the entire higher amount, at a premium rate worse than the agreed insurance.

    Then Flagstar would sell the mortgage, but keep the insurance. So it wasn't liable for the loss, but collected the fees on the risk.

    Flagstar continued this practice after the bubble popped, at least into 2009 the last I heard. So it also got to force purchase of these ripoff insurance policies while people refinanced at record low rates 2009-2013. Which meant they got the higher insurance for at least those years until the loan was fully paid off in the refi, on top of the entirely interest payments of the first mortgage years.

    Sure, this ruling repaid Flagstar's insurer's losses. But what about all the money Flagstar bilked from borrowers as an insurer? Is there justice for anyone but other banks?

    "When the going gets weird, the weird turn pro." - HST

    by DocGonzo on Thu Feb 07, 2013 at 05:42:55 AM PST

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