Mortgage Servicer, Insurance Companies Accused of Overcharging Consumers

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Nationstar Mortgage LLC of Delaware (which does business as Champion Mortgage Company), Great American Assurance Company, and Willis of Ohio Inc. (which does business as Loan Protector Insurance Services) are facing a proposed class action filed by reverse mortgage borrowers.

According to the complaint, Champion services the proposed class members’ reverse mortgages. When borrowers do not have home insurance, or have insufficient home insurance, Champion allegedly informs them that it will purchase “force-placed” insurance on their behalf and charge them for the cost. Rather than seeking out the lowest-priced insurance, Champion allegedly has an arrangement with the co-defendants to insure all the borrowers in its portfolio under a general over-arching policy. According to the suit, Champion receives “kickbacks” from Great American, the insurance provider, and Loan Protector Insurance, the agent that administers the service, which results in Champion paying less for the insurance than it actually charges to borrowers while generating a profit for itself.

The “kickbacks,” according to the complaint, include “commissions” and “expense reimbursements” paid for the work Champion purportedly performs to procure individual policies for homeowners, which, the suit argues, it does not actually perform. The complaint also claims Champion receives money for “illusory reinsurance premiums” and mortgage services “that often have nothing to do with the placement of insurance coverage.” In fact, the suit says “[t]he money paid back to Champion and/or its affiliates is not given in exchange for any services provided by them; it is simply grease paid to keep the force-placed machine moving.”

These allegedly unnecessary expenses are not disclosed to the borrowers, who the suit says are left to bear the actual cost of the insurance while Champion enjoys a rebate it fails to pass on to them. As a result, Champion allegedly pays less than it represents to its borrowers and illegally charges them more than is permitted by their contracts.