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Investigations

GSP Investigating BB&T’s Forced Place Insurance Practices

Goldman Scarlato & Penny, P.C. is investigating a possible claim on behalf of borrowers who obtained a mortgage through Branch Banking & Trust Company (“BB&T”) and who had a hazard, flood or wind insurance policy from American Security Insurance Company (“ASIC”) placed on their home by BB&T.  This practice is known as forced place insurance and BB&T borrowers may have  been charged artificially inflated premiums. BB&T is one of the largest financial services companies, with approximately $210 billion in assets.  This inquiry involves the Company’s mortgage and insurance products.

Goldman Scarlato & Penny is investigating how BB&T handled its customers’ lapses in insurance coverage, in particular lapses in borrowers’ hazard, floor and wind insurance.  It is believed that BB&T worked exclusively with ASIC to impose forced place insurance on its borrowers.  When there was a lapse in the borrower’s hazard, flood, or wind insurance, BB&T purchased the coverage from ASIC on behalf of the borrower in exchange for what may have been illegal kickbacks.  The premiums were charged back to the borrower.

While BB&T had the right to purchase insurance on behalf of its borrowers when they allowed for a lapse in coverage, it may not have been permitted under the terms of its agreements with its borrowers to purchase polices from ASIC at inflated levels.

As part of the alleged scheme, it has been alleged that unsuspecting borrowers were manipulated into paying the full premiums that ASIC had charged to BB&T, even though a large portion of the payments were “kicked back” to BB&T in the disguise of “expense reimbursements” or “commissions.”  It has also been alleged that ASIC assumed the duty to monitor BB&T’s borrowers’ accounts for lapses.  ASIC would then send notices to BB&T customers to inform them of the lapses, assuming BB&T’s identity.  BB&T actually performed no work at all, was not deserving of any expense reimbursement, and should have earned little to no commissions.

In addition, while lapses were often not discovered for months or years, during which time there were no claims of damage to the property, it has been alleged that the costs of premiums were charged retroactively to the date of the beginning of the lapse. Payments were either added to the borrower’s loan, increasing the interest over the life of the loan, or recovered from the borrower’s escrow account.  Investigations into these forced place insurance scams by BB&T and its affiliates began at least as early 2012.  Numerous other financial and insurance providers have also come under scrutiny in recent years.  Many of these cases have already been settled.  For example, the 2013 New York Department of Financial Services’ investigation of similar practices by Assurant, Inc. resulted in restitution to homeowners and a $14 million penalty. That Court Order also prohibited Assurant and its subsidiaries from paying commissions on FPI to servicers and their affiliates.  ASIC is an indirect subsidiary of Assurant, sometimes operating under the trade name “Assurant Specialty Property.”

If you have a mortgage with BB&T and believe that BB&T purchased forced place insurance, including hazard, flood or wind insurance, for you, please contact a GSP attorney to learn more about your rights. Please contact Mark Goldman at goldman@lawgsp.com or Paul Scarlato at scarlato@lawgsp.com or call (484) 342-0700 with any questions you may have.

In our legal system, every person is innocent until and unless found guilty by a court of law or a tribunal. Whenever we reference “allegations” or charges that are “alleged,” such allegations or charges have not been proven, and are merely accusations, not findings of fault, as of the date of the blog. We do not have, nor do we undertake, a duty to continue to monitor or follow cases about which we report, and/or to publish subsequent updates regarding various developments that may occur in such cases. Readers are encouraged to conduct their own research regarding any such cases and any developments that may or may not have occurred in such cases. Also, the brokercheck report linked to some of our blogs is the up-to-date version as of the date of posting. Visitors may check the most recent version of each brokercheck report at www.finra.org.

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