Illinois among 46 states to reach settlement with mortgage servicer for improperly imposing insurance

Illinois is one of 46 states that have reached a $15.5 million settlement with a Pennsylvania-based mortgage servicer for improperly imposing new insurance policies on homeowners who already had insurance.

Fort Washington, Pennsylvania-based NewRez LLC will pay the sum under the settlement, according to a news release from the Illinois Department of Financial and Professional Regulation.

NewRez worked with state regulators to identify and remediate more than $4.5 million to borrowers who were impacted, and the company will pay nearly $11 million in costs and penalties.

A multistate investigation found that NewRez had imposed "force-placed" insurance on 4,200 homeowners nationwide who already had insurance.

Force-placed insurance is supposed to be used only when an insurance policy is canceled, delinquent, or insufficient and the homeowner hasn't replaced coverage. A lender, bank, or loan servicer may impose insurance under these circumstances to protect their interest in the property, and it is usually much more expensive than if a consumer purchases their own insurance.

"Strong consumer protections are essential to maintaining confidence in our financial system," said Mario Treto Jr., Secretary of the Illinois Department of Financial and Professional Regulation, said in a news release. "This settlement reinforces the important role state regulators play in licensing financial institutions and holding them accountable for protecting homeowners, and ensuring these homeowners are treated fairly."

The District of Columbia led the enforcement team in this case, with the assistance of the states of Arkansas, Iowa, Massachusetts, and Montana.