From Bloomberg: One of the more confounding aspects of the
U.S. housing crisis has been the reluctance of lenders to do more to assist
troubled borrowers. After all, when homes go into foreclosure, banks lose
money.
Now it turns out some lenders haven’t merely been unhelpful;
their actions have pushed some borrowers over the foreclosure cliff. Lenders
have been imposing exorbitant insurance policies on homeowners whose regular
coverage lapses or is deemed insufficient. The policies, standard homeowner’s
insurance or extra coverage for wind damage, say, for Florida residents,
typically cost five to 10 times what owners were previously paying, tipping
many into foreclosure.
The situation has caught the attention of state regulators
and the Consumer Financial Protection Bureau, which is considering rules to
help homeowners avoid unwarranted “force- placed insurance.” The U.S. ought to
go further and limit commissions, fine any company that knowingly overcharges a
homeowner and require banks to seek competitive bids for force- placed
insurance policies. Because insurance is not regulated at the federal level,
states also need to play a stronger role in bringing down rates.....
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