This class action lawsuit alleges that Caliber Home Loans, in conjunction with American Security Insurance Company, engaged in a force-placed insurance scheme which caused mortgage borrowers to pay inflated, unjust and unearned commissions, fees and kickbacks.
The plaintiffs in this matter are all homeowners who took mortgage loans which were serviced by Caliber Home Loans. Each plaintiff had insurance coverage force-placed on their property as a result of a lapse in prior hazard, flood or wind insurance coverage, as provided in their loan agreements. Defendant Caliber Home Loans ("Caliber") is a mortgage lender and servicer headquartered in Irving, Texas.
Defendant American Security Insurance Company ("ASIC") is a subsidiary of Assurant, Inc. and is in the business of writing force-placed insurance policies throughout the United States. ASIC contracts with lenders such as Caliber to take over certain mortgage servicing functions such as tracking loans, new loan boarding, loss draft functions, escrow analysis, customer service and securing force-placed insurance policies on properties where prior policies had lapsed.
According to the complaint, Caliber has enjoyed an arrangement with ASIC for many years whereby ASIC performs many of Caliber's mortgage servicing functions and is the exclusive provider of force-placed insurance coverage for homeowners with mortgage loans through Caliber. In exchange for providing ASIC with the exclusive right to monitor the entire Caliber loan portfolio and force-place their own insurance coverage, ASIC, it is alleged, provides Caliber with various kickbacks that the defendants disguise as legitimate compensation. The plaintiffs argue that these kickbacks specifically include:
Due to the existence of these many kickbacks, plaintiffs allege, Caliber effectively receives a rebate on the cost of the force-placed insurance policies, but does not pass those savings onto the borrowers. Instead, the inflated charges for these policies are deducted from borrowers' escrow accounts, resulting in millions of dollars in unearned profits for Caliber and ASIC.
The plaintiff borrowers in this case, on behalf of themselves and other similarly situated prospective class members, outline multiple causes of action against Caliber including breach of contract, breach of implied covenants of good faith and fair dealing and violations of the Truth in Lending Act and unjust enrichment. The complaint also includes claims of unjust enrichment and tortious interference with a business relationship against ASIC.
In addition, the plaintiffs allege violations on the part of Caliber and ASIC of several sections of the Racketeer Influenced and Corrupt Organizations Act, a federal statute that provides a civil cause of action for acts performed as part of an ongoing criminal organization or enterprise. It is argued that the defendants in this case had a common purpose to increase and maximize their revenues by forcing the plaintiffs and prospective class members to pay inflated amounts for force-placed insurance through a scheme that inflated such amounts to cover kickbacks and expenses associated with servicing Caliber's entire loan portfolio and concealing from the plaintiffs the true nature of those charges.
The complaint seeks class certification, an order enjoining the defendants from continuing the actions and practices outlined therein, damages resulting from Caliber's breaches, refunds of all monies unjustly taken by the defendants, pre-judgment interest, actual damages and a penalty of $500,000 or 1% of Caliber's net worth, compensatory and treble damages pursuant to the RICO statute and reasonable attorney fees and costs associated with bringing suit.
This lawsuit was filed on December 10, 2015. We will continue to monitor the docket in 2016 and provide updates as necessary.