Lender Wins Dismissal of Force-Placed Insurance Class Action

more+
less-

On October 30, the U.S. District Court for the Northern District of California dismissed a putative class action alleging that the lender breached certain mortgage contracts and violated state and federal law through its policy and practices requiring borrowers to maintain flood insurance sufficient to cover the replacement value of their homes. McKenzie v. Wells Fargo Home Mortg., Inc., No. 11-4965, 2012 WL 5372120 (N.D. Cal. Oct. 30, 2012). The borrowers claim that the FHA requirement that flood insurance must cover the remaining balance of the mortgage served as a cap on the flood insurance amounts the lender could require. Declining to follow the reasoning of the court in Kolbe v. BAC Home Loans Servicing, LP, No. 11-2030, 2012 WL 4240298 (1st Cir. Sep. 21, 2012), the McKenzie court held that because the deeds of trust authorized the lender to set the required level of insurance and the FHA requirement is a statutory floor, the lender did not breach the mortgage contracts by requiring coverage above the outstanding principal loan balance. Therefore, the court dismissed those claims with prejudice. For the same reasons, the court dismissed with prejudice the borrowers’ claims that letters sent to the borrowers notifying them of insufficient coverage altered the terms of their loans and required the lender to make additional disclosures under TILA. The court dismissed, with one opportunity to amend, claims that the lender breached the contract by force-placing insurance through an affiliate that charged excessive amounts allegedly in exchange for kickbacks.

Written by:

Published In:

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© BuckleySandler LLP | Attorney Advertising

Don't miss a thing! Build a custom news brief:

Read fresh new writing on compliance, cybersecurity, Dodd-Frank, whistleblowers, social media, hiring & firing, patent reform, the NLRB, Obamacare, the SEC…

…or whatever matters the most to you. Follow authors, firms, and topics on JD Supra.

Create your news brief now - it's free and easy »

All the intelligence you need, in one easy email:

Great! Your first step to building an email digest of JD Supra authors and topics. Log in with LinkedIn so we can start sending your digest...

Sign up for your custom alerts now, using LinkedIn ›

* With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name.
×
Loading...
×
×