* Fannie to seek affiliation with an insurer itself
* New York probing industry practices
March 7 The controversial practice of
banks forcing expensive homeowners insurance on borrowers could
come to an end after Fannie Mae told lenders it would seek to
oversee such policies itself.
Government-controlled Fannie Mae, the biggest
source of money for U.S. home loans, notified lenders of the
planned policy change in a Tuesday bulletin, a copy of which was
obtained by Reuters.
"Fannie Mae will soon implement changes to its Lender-Placed
Insurance (LPI) requirements to significantly reduce costs to
homeowners, taxpayers, and Fannie Mae," it said, adding that it
has issued a request for proposals to insurance companies to
compete for the business.
"The (proposal) is structured to ensure that insurance costs
are significantly reduced," Fannie said. Fannie Mae also said it
would issue guidelines to mortgage servicers on when and how to
obtain what are often called "force-placed" policies, and on
what costs would be reimbursable.
Force-placed insurance has long been controversial because
homebuyers are made to purchase such policies, which protect
their lenders, and the costs are typically much higher than
traditional homeowners' insurance.
In many cases, the policies are sold by insurance companies
owned by the lenders, or by insurers with whom the lenders have
a financial relationship.
New York financial regulators have been investigating the
practice, issuing subpoenas in January to roughly two dozen
insurers and mortgage servicers.
American Banker first reported the details of the Fannie