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Rushmore Loan Kickbacks Alleged for Forced-Placed Insurance Class Action

Under certain circumstances, mortgage borrowers may be forced to pay for insurance policies chosen by their mortgage lender or servicer. This force-placed insurance (FPI) arrangement is not illegal. However, the complaint for this class action questions the FPI practices of Rushmore Loan Management Services, LLC, however, alleging that the company receives “an unearned kickback designed to encourage the referral of business at extraordinarily high prices.”

Mortgage borrowers must insure their mortgaged properties in order to protect the interests of the lender. Borrowers who let their insurance expire or those whose insurance isn’t adequate can be forced to accept FPI. In these cases, the lender or servicer chooses the insurer, initiates a policy, then bills the borrower for its cost over time. The amounts owed on the FPI become part of the mortgage debt.

In this case, plaintiffs John and Amy Raams bought property in North Myrtle Beach, South Carolina in January 2020. The following month, they receive a notice from Rushmore saying they did not have flood insurance. Mr. Raams provided proof of insurance from the insurance agent for their homeowner association.

However, it seems that Rushmore did buy FPI on the property. On June 8, 2020, they received a “Notice of Refund of Lender Placed Insurance.” According to the letter, FPI had been purchased and was now being cancelled as of June 1. The letter said, “A premium refund of $420.15 has been credited to” the Raamses’ account, but an “earned premium of $2,084.60 has been charged to your account for the time the policy was in force.”

The Raamses had never been told that a policy had been placed; Rushmore had simply taken money out of an escrow account of theirs to pay for it.

The complaint alleges, “Upon information and belief, Defendant Rushmore received a substantial kickback or commission from Insurer as a percentage of the premium for the Force-Placed Policy.”

The Nationwide Class for this action is all borrowers with a Fannie Mae or Freddie Mac uniform instrument serviced by Rushmore Loan Management Service, LLC on a property located in the US who were charged for, or who paid for, premiums for a force-placed insurance policy, between April 20, 2017 and April 20, 2021, who did not receive a refund of the premiums when they gave Rushmore evidence showing they had hazard insurance coverage that complied with the loan contract’s requirements, unless

  1. the lender has obtained a foreclosure judgement against the borrower,
  2. the borrower has entered into a short-sale agreement with the lender,
  3. the borrower has granted a deed in lieu of foreclosure to the lender,
  4. the borrower has entered into a loan modification agreement with the lender,
  5. the borrower has filed a claim for damages which has been paid in full or in part by the FPI insurer, or
  6. the cost of the FPI was cancelled in full.
Article Type: Lawsuit
Topic: Insurance

Most Recent Case Event

Rushmore Loan Kickbacks Alleged for Forced-Placed Insurance Complaint

April 20, 2021

Under certain circumstances, mortgage borrowers may be forced to pay for insurance policies chosen by their mortgage lender or servicer. This force-placed insurance (FPI) arrangement is not illegal. However, the complaint for this class action questions the FPI practices of Rushmore Loan Management Services, LLC, however, alleging that the company receives “an unearned kickback designed to encourage the referral of business at extraordinarily high prices.”

Rushmore Loan Kickbacks Alleged for Forced-Placed Insurance Complaint

Case Event History

Rushmore Loan Kickbacks Alleged for Forced-Placed Insurance Complaint

April 20, 2021

Under certain circumstances, mortgage borrowers may be forced to pay for insurance policies chosen by their mortgage lender or servicer. This force-placed insurance (FPI) arrangement is not illegal. However, the complaint for this class action questions the FPI practices of Rushmore Loan Management Services, LLC, however, alleging that the company receives “an unearned kickback designed to encourage the referral of business at extraordinarily high prices.”

Rushmore Loan Kickbacks Alleged for Forced-Placed Insurance Complaint
Tags: Forced Placed Insurance, Homeowners Insurance, Kickbacks