$15.5M settlement reached with MD, states over home insurance charges

Mortgage servicer NewRez has reached a $15.5 million settlement with Maryland and 46 other jurisdictions after the company allegedly improperly charged borrowers for force-placed insurance, according to the Maryland Department of Labor.

Jurisdictions participating in the settlement include Pennsylvania, West Virginia, Delaware, Virginia and Washington, D.C., according to a consent order at the New York State Department of Financial Services’ website.

The value of the settlement for Maryland is about $400,000, including nearly $98,000 for 109 Maryland borrowers, according to a release from the Maryland Department of Labor. That’s about $900 per affected consumer.

“The settlement resolves findings that NewRez improperly charged borrowers for force-placed insurance even when those borrowers already had active homeowners insurance coverage, adding costs on top of the mortgage payments families were already covering,” the release states.

Marylanders with questions about the NewRez enforcement action should contact Assistant Commissioner of Enforcement Dana Allen at [email protected], the release states. Residents also can visit NMLS Consumer Access to verify a company is licensed to do business in Maryland and to view past enforcement actions.

NewRez LLC is one of the country’s largest mortgage servicers. It may be known to Maryland borrowers through Shellpoint Mortgage Servicing, its servicing brand.

Maryland also will get about $300,000 in civil penalties, which is the 9th highest penalty amount among the 46 states and D.C. participating in the settlement.

“Our Office of Financial Regulation is holding financial companies accountable and getting money back for Maryland families,” Maryland Labor Secretary Portia Wu said in the release.

“Marylanders trust that when they pay their insurance premiums, they won’t also be billed a second time for coverage they never needed,” Maryland Commissioner of Financial Regulation Antonio P. Salazar said in the release.

“This settlement holds NewRez accountable and puts real money back in the pockets of Maryland homeowners,” Salazar said.

“Force-placed insurance is often required when a homeowner’s policy is cancelled, delinquent, or insufficient in coverage and the borrower has not secured replacement coverage. When necessary, a lender, bank, or loan servicer may force the replacement coverage to protect its financial interest in the property, but this coverage is typically significantly more costly than a policy the consumer secures on their own,” the release states.

NewRez, based in Pennsylvania, worked with state regulators to identify and remediate the issue.

The company will return $4.5 million to over 4,200 affected borrowers across the U.S.

NewRez also will pay another $11 million in costs and penalties.

The company “will be required to implement and conduct enhanced monitoring of loans with force-placed insurance and to strengthen internal controls,” the release states.

“NewRez neither admits nor denies allegations that it engaged in any wrongdoing or that it violated any applicable laws, regulations, or rules at issue here, as well as with respect to any conduct related to persons identified for redress or remediation in connection with this Agreement,” according to the consent order posted at the New York State Department of Financial Services’ website.

The consent order lists administrative penalties, $9.9 million in total, that NewRez is to pay to each participating state and D.C. based on a formula agreed to by the participating jurisdictions.

Those administrative penalties, rounded to the nearest dollar, include:

• Maryland: $294,226
• Delaware: $79,396
• Pennsylvania: $211,066
• Virginia: $233,396
• Washington, D.C.: $81,706
• West Virginia: $77,086

Another almost $1.1 million is to be paid to a group of 12 jurisdictions that participated in the examination and settlement negotiations process, according to the consent order.

That includes $109,063 for D.C. and $87,063 for Pennsylvania.

Reporting by Julie E. Greene, The Herald-Mail / USA TODAY Network via Reuters Connect.