Alert November 12, 2013

FHFA Restricts Force-Placed Insurance Practices

The FHFA has directed Fannie Mae and Freddie Mac to prohibit servicers from being reimbursed for expenses associated with captive reinsurance arrangements. The directive follows the FHFA’s proposal in March 2013 (see April 2, 2013 Alert) to ban mortgage lenders and servicers from receiving commissions or other remuneration associated with maintaining force-placed insurance with certain insurers and from receiving reinsurance premiums through reinsurance entities affiliated with the lender or servicer. The ban is intended to reduce the costs for Fannie Mae and Freddie Mac and comes after receiving input from the Regulatory Working Group established by the FHFA and comments received from the public to the proposal.