Mortgage Credit Life

[sansan]

What is the name of your state? Florida

My mother and father appear to have been victims of predatory lending (high interest rate, high fees, single premium credit life, etc) on a loan closed in 1997. My father recently passed away. When we filed a claim against the credit life purchased, we were told that my parents' credit life application had been denied in 1997. A family member signed the certified receipt; however, the denial letter never made it to my parents. Additionally, my mother continues to be a victim since the credit life premium was financed in their loan. According to the insurance company, standard procedure is for the insurance premium to be refunded as a principal reduction against the mortgage. This never happened! The originating lender is now out of business. The current servicer of her mortgage is denying any responsibility (even though my mother is still paying them for this premium through her mortgage)! The mother company for the business that handled the loan paperwork is in Texas and has filed Chapter 11. They suggested we go after a "shell company" located in California that is using the business name of the company that handled the paperwork. We were also told that this shell company has no assets. We have filed complaints with the State of Florida in both the Insurance and Banking & Finance divisions but no resolution obtained. The premium plus the interest paid thus far amounts to well over $10,000. What other recourse is there available?

 

[CIAA]

Dear sansan,

Further information is needed so feel free to contact us to discuss the situation in more detail.

Credit insurance automatically terminates upon full payment of a loan and therefore, if the loan was actually "closed" in 1997, coverage would have stopped and any unearned premiums would have been credited to reduce the final amount of payoff.

On the other hand, if the loan was bought by someone, then the entity purchasing the loan takes the place of the original "creditor" including being the owner of the policy or the agent of the insurance company, as well as being the beneficiary, and assumes all of the duties and responsibilities of the previous creditor/group policy holder/agent.

If the loan is still active and the premiums were never refunded, then coverage denial was never properly accomplished and the coverage would still be in force. The new creditor would be charged with the knowledge of knowing whether or not the coverage was properly denied and whether or not the premiums were refunded. As such, the new creditor would be responsible for not making sure everything was handled properly.

You should look into these matters and if you don't get cooperation or if you need further help, please feel free to get in touch with us.

 

[sansan]

When I stated that my parents "closed" their loan in 1997, I meant that is when they signed their loan documentation (or went to loan closing). My mother, who is elderly, handicapped and now on a fixed income, is still making payments on this mortgage.

I thought exactly the same regarding the current servicer (or company who purchased their loan) being responsible. This company has stated that since they did not originate the loan, we have no recourse with them. The State of Florida's Division of Banking & Finance barely helped us. The State of Florida's Division of Insurance felt it was Banking & Finance's area since the mortgage company was responsible for the refund.

Thank you for your response. It has re-affirmed my belief on where the responsibility lies.

 

[CIAA]

Dear sansan,

Our staff includes an individual with over 20 years experience in credit insurance administration, with emphasis on claims management and compliance, and based on their advice:

1) These loans are ususlly passed on as "assignment of contract" and the laws and construction of the laws dealing with contract assignments generally pass on all of the benefits, and in turn, all of the duties and responsibilities of the loan originator. Blacks Law Dictionary explains : "Holder in due course...A holder in due course of a consumer credit contract (i.e. consumer paper) is subject to all claims and defenses which the debtor
(buyer) could assert against the seller of the goods or services obtained pursuant to the credit contract or with the proceeds thereof. 16 CFR Sec. 4333.1, et seq." (Demand and analysis of the documents is required).

2) As mentioned earlier, if the premiums were not properly refunded , coverage termination is doubtful, the claim should be filed and considered, and if no responsible parties continue in business, many states maintain an insurance "Guarantee Association" that will consider payment of claims associated with an insurer's inability to pay.

We are not attorneys and do not give legal advise.....but we do know insurance.

 

[sansan]

Once again, thank you for the info. It has re-inforced what we (my family and I) have thought all along.

I have already filed a complaint with the State Attorney's office and hope a satisfactory resolution can be achieved.