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$15.5 Million Settlement Reached Over NewRez's Force-Placed Insurance Charges

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The Ohio Department of Commerce Division of Financial Institutions, along with regulators from 47 other states, has reached a $15.5 million settlement with NewRez LLC over improper "force-placed" insurance charges on borrowers.

The settlement addresses NewRez's practice of charging force-placed insurance premiums to borrowers who already had valid homeowners’ insurance policies. This settlement is a noteworthy development for the mortgage servicing industry, focusing on compliance and consumer protection. Force-placed insurance is typically applied when a borrower fails to provide proof of insurance, allowing the lender to purchase more expensive coverage to protect its financial interests. NewRez’s case highlights the importance of transparent procedures and oversight concerning loan servicing practices.

Details of the Settlement

Headquartered in Fort Washington, Pennsylvania, NewRez (NMLS ID 3013) will not only pay the total settlement amount but has already reimbursed $4.5 million to impacted borrowers. The settlement also includes $11 million in additional costs and penalties. This action follows a multistate examination revealing that over 4,200 borrowers nationwide were incorrectly charged, with significant consumer impacts.

“Ohioans deserve a fair and transparent mortgage process.”

Ingrid White, Interim Superintendent
Ohio Division of Financial Institutions

Implications for the Insurance and Mortgage Industries

This settlement serves as an important reminder for the industry to maintain regulatory compliance and diligent oversight. Insurers and mortgage servicers are reminded of the critical need to establish robust internal controls to prevent similar issues. Enhancing policies related to force-placed insurance could mitigate risks and align with evolving regulatory expectations. By adhering to such standards, companies can strengthen consumer trust and avoid financial penalties.

Key Settlement Outcomes

  • Reimbursements: NewRez refunded $4.5 million to affected borrowers.
  • Penalties & Costs: An additional $11 million will be paid by NewRez.
  • Consumer Impact: Refunds issued to 69 Ohio consumers, totaling $38,680.31.

Looking Ahead

With the enforcement led by the District of Columbia and support from states such as Arkansas, Iowa, Massachusetts, and Montana, the resolution reinforces the value of coordinated regulatory efforts. Insurance professionals and mortgage servicers should closely monitor developments in compliance requirements to protect consumers and uphold industry integrity. As the regulatory landscape continues to evolve, proactive measures and consumer-centric approaches will be key areas of focus. Ohio residents with further inquiries can contact the Division’s Office of Consumer Affairs for assistance and to verify company licensing through NMLS Consumer Access.