NEW YORK, May 9, 2012 (GlobeNewswire via COMTEX) -- The law firm of Kirby McInerney LLP announced today that it is investigating potential class action claims against Wells Fargo Home Mortgage in connection with a scheme to improperly inflate the cost of force-placed hazard insurance.
To protect the lenders' interest in secured property, mortgage loan contracts require the borrower to maintain specified levels of hazard insurance. If the borrower's coverage lapses, the lender is entitled to purchase coverage for the home, "force place" it, and be reimbursed by the borrower for the cost.
Kirby McInerney is investigating whether Wells Fargo has procured kickbacks from its force-placed insurance providers in connection with the mortgage loans in its servicing portfolios. It is believed that the premiums paid by Wells Fargo to the providers are grossed up to include the dollar value of the kickbacks and, furthermore, that Wells Fargo's demands to borrowers for reimbursement are based on these inflated sums. The New York State Department of Financial Services is conducting an investigation of improper practices relating to force-placed insurance, including force-placed insurance charges that are inflated by kickbacks. It has issued subpoenas to Wells Fargo in connection with its investigation.