A lawsuit has been filed against U.S. Bank claiming that the bank forced-placed expensive and unnecessary flood insurance. According to the complaint, U.S. Bank required certain borrowers to purchase flood insurance in excess of what is required by their mortgage agreements and federal law. Further, it has been alleged that U.S. Bank obtained the expensive flood insurance by means inconsistent with both the mortgage agreement and federal law, while accepting unlawful kickbacks and commissions in connection with the practice. Borrowers subjected to excessive forced-placed flood insurance by U.S. Bank may have legal recourse to recover the unnecessary costs they were made to pay.
Unnecessary U.S. Bank Flood Insurance
As outlined in the complaint, the plaintiff alleges that U.S. Bank acquired his mortgage loan of $112,400 from another bank. When the plaintiff purchased the loan, federal law did not require him to carry flood insurance, as the property did not fall within a designated Special Flood Hazard Area. However, three years later, FEMA revised its mapping and districting, and determined that the plaintiff’s property now falls within a flood hazard. The plaintiff was therefore required to purchase flood insurance in an amount that did not exceed the “outstanding principal balance of the loan or the maximum limit of coverage made available under the [National Flood Insurance Act],” whichever is less.
Despite these clear guidelines, U.S. Bank demanded that the plaintiff purchase flood insurance that exceeds the federal requirements substantially, according to the complaint. The bank allegedly issued the plaintiff a notice that if he did not purchase the excessive insurance himself, the bank would procure the coverage for him and charge the cost to his escrow account. U.S. Bank then forced placed the unnecessary and overly expensive insurance onto the plaintiff, the suit claims.
One purported class action lawsuit has already been filed against U.S. Bank claiming that that the bank and co-defendants force-placed excessive flood insurance, procured payment through illegal means and arranged for kickbacks and commissions for itself and its affiliates.