Tuesday, October 22, 2013

SunTrust Banks sued over force-placed insurance

Atlanta-based SunTrust Banks, the sixth-largest bank in the Charlotte metropolitan area, said Tuesday that it has been named in three class-action lawsuits involving force-placed insurance.

The cases are in U.S. district courts in California, Florida and Georgia, the bank said. In the California case, the bank said, its motion to dismiss was partly granted and denied. The bank said it is still seeking to have the other two cases dismissed. It disclosed the lawsuits in a securities filing.

SunTrust is among other banks to be sued over force-placed insurance, which critics say has led to abusive practices against borrowers. A lender or mortgage servicer will impose the insurance on a property if a homeowner lets their policy lapse. Regulators have grown concerned about the high premiums that come with the force-placed policies, as well as the insurance company payments to lenders and mortgage servicers in order to compete for their business.

SunTrust said it is being accused in the lawsuits of getting "kickbacks or other improper benefits" from insurers and not adequately negotiating the policies on behalf of borrowers.

The Federal Housing Finance Agency, regulator of Fannie Mae and Freddie Mac, is studying the force-placed industry and considering a nationwide ban, according to news reports.