Bank of New York Mellon Insurance Charges on Redemptions Class Action

When a bank forecloses on a property, it is likely to take out hazard insurance to protect it. This hazard insurance may only be in force for a matter of months if the former owner or an assignee redeems the property. However, the complaint for this class action alleges that the Bank of New York (BNY) Mellon Corporation charges those who redeem properties for a full year’s worth of hazard insurance, even though it may receive reimbursement from the insurance company for the unused portion.

The class for this action is all those who live in the US who redeemed a property that BNY bought in foreclosure and who, as part of that procedure, reimbursed BNY for property insurance premiums not prorated for the period of BNY’s ownership. There is also a Kansas Subclass for those who redeem property located in Kansas.

In certain states, homeowners who lose their properties in a foreclosure proceeding are permitted to redeem, or buy back, the property within a certain period after the sale. In Kansas, the period during which the former homeowners may redeem the property varies according to the amount of the mortgage balance remaining. If the former homeowner has paid off less than a third of the mortgage loan, the period is three months; if the homeowner has paid off more than a third, the period is twelve months.

To redeem a property, a person must pay the sales price for the property plus the amount of certain costs incurred during the redemption period. These include such things as taxes and insurance premiums. Hazard insurance is one of the items the former homeowners must pay.

If the redemption period has run for less than a year, it is possible for the bank to be reimbursed for the unused portion. But the complaint says that BNY Mellon does not charge the redeeming homeowner the prorated cost.

The complaint puts the allegation this way: “BNY Mellon has charged individuals who redeem their homes after foreclosure sales for a full year of hazard insurance, even though just a small fraction of the insurance is typically used, and even though insurance companies will typically reimburse a purchaser for unused insurance.”

It claims that this practice is particularly egregious: “BNY Mellon is unjustly enriching itself and misleading persons who are at their most financially vulnerable—homeowners who just lost their homes in foreclosure proceedings and art trying to struggle back and recover their homes.”

According to the complaint, “The amounts are not de minimis.” While the price varies, depending on the value of the property and other considerations, the complaint estimates the price to be between a little less than a thousand dollars and thousands of dollars.

Article Type: Lawsuit
Topic: Real Estate

Most Recent Case Event

Bank of New York Mellon Insurance Charges on Redemptions Complaint

November 6, 2020

When a bank forecloses on a property, it is likely to take out hazard insurance to protect it. This hazard insurance may only be in force for a matter of months if the former owner or an assignee redeems the property. However, the complaint for this class action alleges that the Bank of New York (BNY) Mellon Corporation charges those who redeem properties for a full year’s worth of hazard insurance, even though it may receive reimbursement from the insurance company for the unused portion.

Bank of New York Mellon Insurance Charges on Redemptions Complaint

Case Event History

Bank of New York Mellon Insurance Charges on Redemptions Complaint

November 6, 2020

When a bank forecloses on a property, it is likely to take out hazard insurance to protect it. This hazard insurance may only be in force for a matter of months if the former owner or an assignee redeems the property. However, the complaint for this class action alleges that the Bank of New York (BNY) Mellon Corporation charges those who redeem properties for a full year’s worth of hazard insurance, even though it may receive reimbursement from the insurance company for the unused portion.

Bank of New York Mellon Insurance Charges on Redemptions Complaint
Tags: Foreclosure Redemption, Insurance, Unfair Charges, Your Bank