Bank didn't tell widow she had mortgage insurance, even as home foreclosed
A California widow nearly lost her longtime home through foreclosure and had to declare bankruptcy to buy enough time to save it, ruining her credit.
Meanwhile, the mortgage servicer, Bank of America, Select Portfolio Servicing, didn’t tell Laura Coleman Biggs that her husband had purchased a $100,000 insurance policy to pay off the mortgage after his death–and continued to charge her a premium for the policy, reports McClatchy News Service. When he died, the balance on the mortgage was about $120,000.
Legal administrator George Bosch of the Edward Lopez law firm in Los Angeles saved the day for Biggs when he asked for an itemized list of expenses being charged concerning the mortgage. He also asked about one that struck him as unusual. Might it be an insurance premium?
“Silence on the other end of the phone. They didn’t want to answer the question,” Bosch said. But within a few days, he learned the answer was yes: American Bankers Life Assurance Co. of Florida held the policy, which had been purchased through the original lender, NationsCredit Financial Services Corp.
The Bank of America described her plight in a written statement as “an extremely unusual case that has been confounded by multiple situations,” including the fact that her name was not on the loan; two different names were listed for her husband; and her own lack of awareness that a mortgage insurance policy existed.
The statement also said that Bank of America’s partners have now paid Biggs what she is owed. In May of last year, she got a check for $24,512.65, plus a second one for interest of $2,707.49, calculated at a 1 percent rate. After she complained, two more checks were sent for $75,487.35 and $8,360.92 in interest, the McClatchy story says.
Biggs has since filed suit in U.S. District Court in the Central District of California, alleging a violation by the servicer and the insurer of their duty of good faith and fair dealing and seeks additional damages.
“I think there are hundreds or thousands of Mrs. Biggses out there,” said her lawyer Peter J. McNulty. “She’s the 1 percent who had the good fortune to find someone who gave her good legal advice.”
There was no clear statutory requirement that lenders or insurers must provide notice to policyholders or their beneficiaries in such situations, according to the newspaper. The Consumer Financial Protection Bureau, however, imposed regulations last year and is proposing more to help protect homeowners and their survivors.
