Rate cuts and policy changes to eliminate high charges for force-placed homeowner' insurance are sweeping the nation, led by insurance regulators in New York and California.  

Furthermore, courts are nearing final action on nationwide class action lawsuits filed in Federal District Court in Miami that involves six of the largest mortgage servicers.

At the same time, a Federal District Court judge in New York Sept. 30 raised the stakes higher for insurance carriers and mortgage servicers involved in placing FPI on troubled homeowners in the aftermath of the housing boom earlier in the decade that turned out to be a huge bust.

In general, a ruling by the judge hearing the New York case means that carriers and mortgage servicers could be subject to triple damages. Second, the grounds for the suit make it easier to file a nationwide class action lawsuit. And, third, it bars defendants from claiming rates imposed through FPI were legal because they were approved by states, a common defense in the lawsuits.

The American Security settlement is consistent with the rate order and reforms the Florida department entered into in February with Praetorian Insurance Co. Praetorian agreed to an 18.8 percent rate cut. Praetorian also agreed to make another rate filing on Feb. 1, 2014.

An OIR spokesperson says the agreements with American Security and Praetorian, mean that 90 percent of the Florida FPI market will be covered by new reforms.

Praetorian now includes QBE Specialty Insurance Company, a surplus lines insurer, and its affiliated admitted company, Balboa Insurance Company. They merged their lender-placed insurance programs into Praetorian as part of the settlement with the Florida Insurance Department. GMAC and Balboa are the defendants in the New York suit.

QBE and Assurant are the defendants in the six class action lawsuits now being processed through the Federal District Court in Miami.

Other part of the American Security settlement include a requirement to notify all current borrowers by mail and within 120 days of the execution of the Consent Order to inform them about alternative options available for LPI coverage; a prohibition against the payment of contingent commissions based on underwriting profitability or loss ratios, either directly or through an affiliate; a prohibition against providing free or below-cost outsourced services to a mortgage servicer; and a prohibition against the payment of any incentive to a mortgage servicer as an inducement to secure LPI business.