NewRez has agreed to pay $15.5 million to resolve a coordinated multi-state examination that found the mortgage servicer charged thousands of borrowers for lender-placed insurance they did not need, a settlement that shows how state financial regulators are pooling examination authority to police servicing conduct.
The agreement, signed by 48 state agencies across 47 states, resolves findings from an examination that began in January 2022 and covered a one-year period ending October 31, 2021. Regulators, working through the Conference of State Bank Supervisors and the American Association of Residential Mortgage Regulators, found that Fort Washington, Penn.-based NewRez violated the Real Estate Settlement Procedures Act and Regulation X by assessing force-placed policies on accounts that already carried valid homeowners coverage.
Force-placed insurance, also called lender-placed insurance, lets a servicer buy hazard, flood, or wind coverage on a borrower’s behalf when the borrower’s own policy lapses. It typically costs far more than a policy the consumer secures independently, and misapplying it produces direct consumer harm.
The $15.5 million breaks into three parts: a $9.9 million administrative penalty, roughly $1.09 million in administrative costs to the states that ran the exam, and a $4.5 million credit reflecting refunds NewRez already paid to affected borrowers. The company self-identified the problem and remediated impacted accounts before the deal closed. It neither admitted nor denied wrongdoing.
Beyond the payment, NewRez must adopt enhanced monitoring standards within 90 days and keep them in force for one year. The servicer will sample newly boarded loans carrying force-placed insurance each month, manually review documentation, and report results to a three-state executive committee led by the District of Columbia, Iowa, and Massachusetts. A failure rate above 5% on any monthly sample triggers a reporting obligation, and NewRez can cure errors by terminating the coverage and refunding all premiums and fees. The company must also complete a separate self-audit of force-placed insurance activity from January 2023 forward and refund any additional consumers it identifies.
