As the Consumer Financial Protection Bureau (CFPB) plans to issue new rules on force-placed insurance in the coming year, State Employees’ Credit Union (SECU) welcomes a review by the Bureau of the Credit Union’s consumer-friendly approach which has resulted in less than 1% of mortgages ever requiring force-placed coverage. Additionally, a mere .60% of mortgages require force-placed insurance for more than 60 days at the Credit Union. These low percentages are the direct product of several practices at SECU, including mandatory escrow requirements (with interest earned by the member on their escrow account), direct contact with members upon initial coverage cancellation, as well as the Credit Union’s ongoing Mortgage Assistance Program.
Known for its “Do the Right Thing” mentality, State Employees’ Credit Union agrees with the need for the CFPB to propose a regulation that would prevent servicers from charging for force-placed insurance products unless there is “a reasonable basis to believe that borrowers have failed to maintain their own insurance.” For SECU, working with members to help avoid any needed force-placed insurance has always been the norm. As the servicer for more than 125,000 mortgages with balances in excess of $12 billion, the Credit Union’s low force-placed coverage percentage speaks volumes about the success of everyday practices. Insurance is closely tracked by the Credit Union’s Loan Servicing staff, using the escrow functionality in the real estate system and a member is contacted as soon as SECU receives an insurance cancellation. In many cases notification is received 2-4 weeks prior to the cancellation date, so there is plenty of time to pursue resolution. Once a cancellation date is reached, the member is given another opportunity to resolve the issue prior to placing force-placed coverage, with SECU staff even reaching out to provide quotes for traditional insurance.
Additionally, State Employees’ Credit Union has worked to keep the cost of any force-placed premiums at a minimum, preferring to help members keep their current lower-cost policy in place, if at all possible. A review of recent force-placed claims revealed that on average SECU members’ traditional insurance cost is $.435 per $100, compared with a force-placed premium of $.85 per $100. However the industry cost, on average, for force-placed insurance can be up to 10 times the cost for traditional insurance. All SECU lending, servicing and collections officers are salaried staff. Insurance commission streams are not used to compensate, reward, nor incent product placement, which may create the potential for conflicts of interest in member service decisions.
Mark Coburn, State Employees’ Credit Union Senior Vice President of Loan Servicing, explains, “SECU has always been proactive in reaching out to members when any insurance cancellation occurs. The ultimate goal for us as a financial cooperative is to avoid any lender-placed insurance and help members budget for the annual cost of homeowners insurance through a required escrow account. With SECU paying interest on these escrowed funds, the budgeting process is a win-win for members. SECU will never utilize lender-placed insurance as an initial reaction to a member’s insurance cancellation dilemma --- it’s just not the right thing to do!”