Ocwen, SWBC Accused of Charging Homeowners Unnecessary Force-Placed Insurance Premiums

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A proposed class action has been filed against Ocwen Loan Servicing, LLC and Southwest Business Corporation (SWBC) alleging the two companies charged mortgage borrowers for unnecessary force-placed insurance policies.

According to the complaint, homeowners with Ocwen-owned or -serviced mortgages are required by the company to purchase hazard insurance policies to cover their properties, with Ocwen retaining the right to charge the consumers for force-placed insurance should they fail to acquire their own policies. The case argues that Ocwen entered into an agreement with SWBC to force-place insurance on borrowers’ homes even when they already had a valid policy in place. A step further, Ocwen allegedly charges significantly higher prices than consumers would pay by retaining their own insurance, thereby adding “another layer of unnecessary and unjustified cost” to homeowners, the case says. From the complaint:

“In the event that borrowers are unable or unwilling to maintain hazard insurance policies, Ocwen procures such policies, but does so with considerably more expensive policies provided by SWBC pursuant to a contract between Ocwen and SWBC. Ocwen then forces borrowers to pay for the policies by diverting monthly mortgage payments and/or debiting the borrowers’ escrow or suspense accounts.”

The lawsuit claims the premiums Ocwen charges are more than the actual cost of insurance. Ocwen allegedly “does no meaningful work” in procuring each policy yet receives a portion of borrowers’ premiums from SWBC in exchange for referring business to the company, the suit says. The policies, according to the suit, fall under a “pre-arranged master policy with SWBC” and are not chosen on a case-by-case basis in accordance with each homeowner’s needs. The payments Ocwen receives “amount to an unearned kickback” that unlawfully benefit the loan servicer by allowing it to pocket consumers’ premiums, the lawsuit alleges.

“Here, Ocwen and SWBC have engaged in a pattern of unlawful and unconscionable profiteering and self-dealing in regards to their purchase and placement of force-placed insurance policies,” the plaintiff alleges. “In doing so, Ocwen and SWBC acted with bad motive and bad intentions and in order to extract funds from Plaintiff and the Class.”