Mortgage servicer NewRez LLC will pay $15.5 million to resolve a multistate examination that found the company improperly charged force-placed insurance to more than 4,200 borrowers nationwide who already had active homeowners insurance policies, the Arkansas Securities Department announced August 12.
Force-placed insurance is coverage a mortgage servicer buys on a borrower’s behalf, at the borrower’s expense, when the servicer believes a homeowner has let their own policy lapse. Regulators found NewRez was imposing that coverage — and its added cost — on borrowers who in fact already had insurance in place, according to the settlement announcement.
The settlement was led by the District of Columbia, with Arkansas, Iowa, Massachusetts and Montana participating in the multistate examination. NewRez, based in Fort Washington, Pennsylvania, had already identified and reimbursed $4.5 million in consumer harm to affected borrowers before the settlement; the remaining $11 million covers additional costs and penalties.
“This settlement holds NewRez accountable for harm done to Arkansas homeowners and requires a change in behavior,” said Arkansas Securities Commissioner Susannah T. Marshall. “As insurance prices continue to rise, servicers must implement effective procedures to ensure borrowers are not subjected to unnecessary or additional fees.”
As part of the settlement, NewRez is required to enhance its monitoring of loans flagged for force-placed insurance and strengthen internal controls meant to verify a borrower’s existing coverage before imposing a forced policy, regulators said.
What it means
Verified facts: state regulators found NewRez charged thousands of borrowers for insurance they did not need, and the company has agreed to pay $15.5 million and adopt new monitoring procedures as a result.
RealtyWire analysis: the settlement lands at a moment when homeowners insurance costs are already a flashpoint for affordability nationally — Texas premiums alone are up 30% over five years — and force-placed policies are typically far more expensive than a borrower’s own coverage. Commissioner Marshall’s comment linking the settlement to rising insurance prices suggests regulators see servicer oversight of insurance charges as a growing enforcement priority, not an isolated case. That follows a pattern of state and local scrutiny of how mortgage and insurance costs are billed to homeowners, including insurer claims-handling practices RealtyWire has covered and Florida’s broader property-insurance litigation reforms.
What to watch: whether other state regulators bring similar force-placed insurance actions against other large servicers, and whether NewRez’s new monitoring requirements become a template other multistate examinations point to.
