Force-Placed Insurance Terms to Know

QBE’s Mortgage Clients:
Aurora, OneWest (IndyMac Federal), GMAC, BofA (BAC Consumer, BAC Reverse, BACHL), PennyMac, Financial Freedom, Saxon,

(Prior Clients) Select Portfolio Services, Downey, Homecomings Financial

QBE’s Auto Clients:
Compass, Wells Fargo Dealer Services (Wachovia), Wells Fargo Financial
Services.

Terms for force placed insurance:
LPI – Lender Placed Insurance
LPP – Lender Placed Policy (alternate term for LPI)
FOH/FOW/FOF – Force Ordered Hazard/Wind/Flood (other terms for LPI)
CPI – Collateral Protection Insurance (LPI for auto)
REO – Real Estate Owned (Insurance on foreclosed homes)

Systems:
Collateral Command System (CCS) – Balboa’s force placed insurance tracking system. LPI/REO is tracked in this system and then tapes/reports/etc are sent on a daily, weekly, etc basis to LPS/Fidelity to update policy info. System of record for CCS-based lenders (Financial Freedom, GMAC, Saxon, Compass, Wells Fargo/Wachovia). If you are have a specific loan number, you can pull it up in CCS, and on the 2.2 screen (accessible to all Data Processing, Customer Service, and Claims processors from the system’s main screen) you can view a history of any updates made to the loan. This is where you’ll see various backdated policies. In addition, you can check for overlapping coverage between LPP/REO.

Lender Processing Services (LPS)/Fidelity – OS/390 based system of record for LPS based lenders (Aurora Loan Services, IndyMac Federal, PennyMac). Most fixes in this system are completed by the Loan Servicer rather than the Insurance Tracker. Large scale issues are discussed in regular meetings with the Fidelity Powercell. The LPS system is divided into screen subsets for specific purposes. For
example, the HAZ screens are where hazard insurance is tracked:

HAZM – Hazard Maintenance Screen – Historical policy information for approximately the last 3 years.
HAZN – Hazard Notes Screen – Operator and automated system generated notes to explain any hazard insurance updates.
HAZ1 – Hazard Update Screen 1 – Screen where hazard insurance changes/updates/corrections are made, payment issued, etc.

The same screen subset format is utilized for REO_ (Real Estate Owned tracking/maintenance), FOR_ (Foreclosure Tracking), SER_ (General Loan Customer Service info/tracking), ORG_ (Loan Origination information, i.e investor, etc), MAS_ (Master Promissory Note info).

AS/400 (aka iSeries) – Alternative to LPS system. Utilized by Bank of America, BACHL, etc.

Passport
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Passport is utilized to run queries on every LPS field for every LPS lender. For example, you can create a spreadsheet with every loan in a mandatory flood zone (A or Z), all escrow/non-escrow loan, all loans with force placed insurance/REO, etc, etc.

In addition to the above systems, there is a digital file cabinet utilized Balboa in order to house all exception reports. All reports are archived indefinitely and can be easily accessed for any
lender/system. Some of the reports you will want to look at are:

P449 Reports – There are 3 P449 reports, which are utilized by Aurora & PennyMac: P449-1, P449-2, P449-3. Report 1 shows any payments issued to preferred (customer obtained) and LPI policies for the date specified. It includes premium amount, coverage amount, effective/expiration date of policy, Ins company, etc. Report 2 shows any pending future payments. A payment for an insurance policy will
not be made until within 60 days of the policy effective date. Until that time, the payment request will be reported on the P449-2. Report 3 shows any rejected payments for one reason or another (insufficient
escrow funds, invalid payee, etc).

S22I/L Reports – Similar to P449 reports, the S22I shows all preferred Insurance policies that have been updated to the LPS system. The S22L shows Lender placed policies updated to the LPS system. The S22I/L report structure is utilized by IndyMac, SPS, etc.

Compare Reports – For lenders such as BAC, GMAC, Financial Freedom, Compare reports are used to update information to the Loan Servicer’s system of record. The Compare Reports track any instance where information on Balboa’s CCS system does not match the loan information on the Mortgage System of Record (SOR).

The following departments are utilized to perform maintenance:

Premium Administration/Data Integrity – These 2 departments are under an umbrella called Insurance Integrity. These departments are responsible for reviewing system inconsistencies to ensure Balboa’s
system matches the Loan Servicer’s. In addition, they are responsible for monitoring duplicate coverage, flood gap insurance, REO insurance on foreclosed homes, and payment exception reports.

Cash/Distribution Management – These departments are responsible for all distributions made from a borrower’s escrow account, creating/analyzing escrow balances, etc.

Exception Processing – This department tracks incoming preferred policy documentation, calling agents to fill in any missing info, and issuing payments for escrowed accounts. If the Exceptions Processing department decides they are Unable to Locate (UTL) a received insurance document, they will place a force placed policy on your account.

Claims/Loss Draft Services – These departments process incoming claims for all loans tracked by Balboa. Their policies and procedure manuals (known internally as P&P’s) detail step by step instructions for how to file claims, which includes the steps to verify preferred policy info prior to placing a claim on an FOH policy.

Some of the possibly fraudulent activities performed are:

Duplicating Coverage, then running an Escrow Analysis on the account which raises the borrower’s monthly payments, in many cases causing the borrower to fall behind on payments and eventually lose their home/car. As QBE & Assurant operate as both the Insurance Tracker and Force Placed Insurer (as well as acting as the Loan Servicer for customer contact functions.

Cancelling policies due to an insurance company updating the Loan Servicer in their systems. This creates another form of duplicate coverage in which a borrower still has an active voluntary policy in force, but the Insurance Tracker refuses to acknowledge this.

Backdating premiums/coverage – LPP Master policies for each lender/product type (i.e Aurora Force Ordered Hazard, IndyMac Force Ordered Wind, etc) are utilized to backdate coverage for periods in
which there are no losses.

Condo Master Policies – If a Condo master policy is cancelled (or updated coverage info is not received by the Insurance Tracker, which it is often not as Master policies tend to be effective until cancelled), all loans in the condo (3-1000 units) will be charged for an individual policy and are required to individually provide proof of a master policy.

Claims/LDS – Reps filing claims are trained to always search for a preferred insurance policy to file the claim on prior to filing on the LPP/REO policy.

Escrowed Insurance – when a borrower has insurance payments in Escrow added to their mortgage payment, it is the Loan Servicer’s contractual responsibility with the borrower to track and pay their mortgage insurance. Both QBE/Balboa and Assurant are contracted by the Loan Servicer to act as the Insurance Tracker. In addition, they are also acting as the Force Placed Insurer. This means that if your insurance isn’t paid on an Escrowed account, it is the Insurance Tracker/Force Placed Insurer’s fault as a single entity that your insurance wasn’t paid. They are now forcing their own Force Placed policy (which accounts for the majority of their company profits) on an account in which they were the party that did not pay your insurance in the first place.

 

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Brian Penny is a former Business Analyst and Operations Manager at Bank of America turned whistleblower, troll, and freelance writer.

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