NewRez Insurance Settlement
NewRez settles for $15.5M with 49 states over improper force-placed insurance practices
Key Points
The settlement's financial breakdown totals $15.5 million, including $4,511,242 in remediation for affected borrowers, a $9.9 million administrative penalty, and about $1.08 million in related costs to be distributed among regulators in 47 states (48 participating regulators).
The multistate examination covered November 1, 2020, to October 31, 2021, found force-placed insurance imposed on more than 4,200 borrowers with active homeowners policies, resulting in about $4.5 million in consumer harm and violations of RESPA and Regulation X.
The deal requires a one-year enhanced monitoring program, including monthly tests of newly boarded loans with lender-placed insurance, manual review of prior-month samples, and reporting of results to an executive committee with a cure if failure rates exceed 5%.
NewRez states it cooperated with investigators, does not admit wrongdoing, and notes that identified issues have since been addressed with remediation already provided and preventative measures implemented.
Mortgage servicer NewRez LLC has agreed to a $15.5 million settlement with Arkansas and 48 state financial regulators over improperly charging borrowers for force-placed insurance — coverage added by a lender when it claims a homeowner lacks a policy — even when those borrowers already had active homeowners insurance, according to Bloomberg Law and Mass.gov.
More than 4,200 borrowers nationwide were affected during the review period, with total consumer harm estimated at about $4.5 million. NewRez says it cooperated with investigators, does not admit wrongdoing, and has already addressed the issues.
Where the $15.5 Million Actually Goes
The settlement breaks down into three parts. NewRez will pay $4,511,242 directly to harmed borrowers as remediation. It will also pay a $9.9 million administrative penalty. The remaining roughly $1.08 million goes to cover costs shared among regulators in 47 states, according to Mass.gov.
New York borrowers alone will receive about $400,000 in refunds, Newsday reported. The Pennsylvania-based company services home loans across the country, making the multistate probe unusually broad in its reach.
Force-Placed Insurance Fees Charged on Top of Existing Policies
Regulators examined NewRez's mortgage servicing practices from November 1, 2020, to October 31, 2021. During that window, the company placed insurance policies on more than 4,200 borrowers who already had coverage, according to Bloomberg Law. That practice violates RESPA — the federal Real Estate Settlement Procedures Act — and its accompanying Regulation X rules.
Force-placed insurance is typically far more expensive than a standard homeowners policy. Charging it to someone who already has coverage means they pay twice — once for their own policy and again for the lender's add-on. Regulators put the total harm from that double-billing at about $4.5 million, Finger Lakes 1 reported.
One Year of Strict Monitoring with a 5% Failure Threshold
As part of the deal, NewRez must run a one-year enhanced monitoring program. Every month, the company must test newly boarded loans that carry lender-placed insurance. Staff must also manually review a sample of loans from the prior month, according to Mass.gov.
Results go directly to an executive committee. If the failure rate on those tests tops 5%, NewRez must fix the defects. The program also requires a self-audit of all lender-placed insurance fees. Regulators say these controls are designed to make sure servicers follow federal rules going forward.
NewRez Says Problems Are Fixed, But Admits Nothing
NewRez pushed back on the framing of the settlement. The company said it cooperated fully with investigators and stressed that it does not admit any wrongdoing. It also said the issues flagged during the 2020–2021 review period have already been resolved and that it has put new safeguards in place, according to Newsday.
Regulators, for their part, framed the deal as a win for homeowners. State agencies said the settlement sends a clear message that mortgage servicers must follow the law when handling insurance requirements. For affected borrowers, remediation payments are expected to flow as part of the settlement's implementation.
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