Forced place insurance class actions are multiplying

May 23, 2012 by

Consumers are bringing a growing number of lawsuits against home mortgage lenders and their captive insurance entities.  Since December 2006, class action litigation has been brought against a number of large lenders alleging that their captive mortgage reinsurance arrangements violate RESPA.

On December 11, 2011, seven mortgage insurers (including MGIC) and a large mortgage lender (which was the named plaintiffs’ lender) were named as defendants in a complaint, alleged to be a class action, filed in the U.S. District Court for the Central District of California.  On December 30, 2011, a similar complaint was filed in the U.S. District Court for the Eastern District of Pennsylvania by different plaintiffs against the same seven mortgage insurers and another large lender.  The complaints in both cases alleged various causes of action related to the captive mortgage reinsurance arrangements of these two mortgage lenders, including that the defendants violated RESPA by paying excessive premiums to the lenders’ captive reinsurer in relation to the risk assumed by that captive.  The named plaintiffs’ loans were not insured by MGIC.

MGIC denies any wrongdoing and intends to vigorously defend itself against the allegations in the lawsuits.  There can be no assurance that the company will not be subject to further litigation under RESPA (or FCRA) or that the outcome of any such litigation, including the recent lawsuits, would not have a material adverse effect on the company.

Steve Larson
An experienced trial lawyer who handles both hourly and contingent fee cases, Steve has expertise in class actions, consumer cases, antitrust litigation, securities litigation, corporate disputes, intellectual property disputes, unfair competition claims, employment matters, and disputes involving family wealth. Steve regularly represents individuals and businesses in federal and state court and has obtained class-wide recovery in multiple class actions. A veteran practitioner, Steve's clients value his creative approach to resolving complex litigation matters.

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