Anonymous Leaks Indicate Widespread Insurance Fraud — And Show How Banks Made More Money Dragging Out Foreclosures
March 17, 2011 05:00 PM
Remember when I wrote last month about a Philadelphia music promoter who sued Wells Fargo — and won the right to auction off their property?
I couldn’t figure out why Wells Fargo was forcing this replacement-value insurance policy on the guy:
Rodgers made all his mortgage payments on time, but Wells decided out of the blue that he had to carry insurance for the full replacement value of his home — $1 million — and started to charge him an extra $500 a month in premiums. When Rodgers sent a formal letter to the lender questioning this, they did not answer in good time, so a court awarded him $1,000 in damages, which Wells wouldn’t pay. So the court is allowing him to sell the contents of the lender’s office to make good on the bill.
[…] “It’s a completely unreasonable demand,” says Irv Ackelsberg, a mortgage expert at the Philadelphia law firm Langer, Grogan & Diver. “Their interest is in protecting their mortgage, not ensuring that the house is rebuilt.”
Rodgers’ next step put him at some risk, he concedes now. He refused to renew the higher-cost policy. Instead, Wells Fargo bought him so-called forced-placement insurance – a policy that typically costs much more than ordinary coverage and only protects the mortgage-holder’s interests.
It took a couple of days after the Anonymous leak for the contents to sink in, but I finally connected the dots. Rodgers was more than a victim of bank abuse — this was systematic outright fraud throughout the mortgage and banking industry. It wasn’t just Wells Fargo.