The two major players in the industry are Assurant and QBE—through its own operations and through its acquisition of Balboa from Bank America in 2011. BankAmerica acquired it as part of its acquisition of Countrywide in 2008.

Analysts view the report with limited dismay. Together, Assurant and QBE control 90% of the force-placed market, analysts estimate.

Robert Byrd, senior director, communications for Assurant's Specialty Property unit, responds, "Our role, and consistent practice, has been to make certain insurance is appropriately in place as required by the terms of the mortgage, with approved rates and within applicable regulations.

"Like others in the industry, we are reviewing the Inspector General's report and are committed to continued dialogue with the FHFA," Byrd says. John Nadel, an analyst at Sterne Agee & Leach in New York says in an investment note this morning that, "Given that Assurant controls over two-thirds of the lender-placed market, it's not difficult to assume a settlement could be material [to the company]."

But, Nadel says, given the improvement in the housing market, the FPI business is going to fade anyway, and he notes Assurant plans to sustain its earnings growth in the future by turning its attention to acquisitions.

The report says the $157 million figure was from "excessively priced" forced-placed coverage. It was based on an analysis conducted by a state-insurance regulator, the Inspector General said.

"We recommend that FHFA assess the merits of litigation by the [government-sponsored enterprises] against their servicers and [FPI] providers to remedy potential damages caused by past abuses in the [FPI] market and, then, take appropriate action in this regard," the report says.

The report is the latest blow to the FPI market. States, especially New York, California and Florida, are cracking down in various ways on the FPI product, including settlements with major players and caps on pricing of FPI.

Furthermore, "dozens of force-placed insurance class-action lawsuits [are] being litigated across the country," according to the newsletter, Top Class Actions.

In 2012 and 2013, New York, Florida and California accused Assurant and QBE, including Balboa, of charging excessive LPI rates and began to enter into consent orders to settle the claims. 

Last year, for example, New York's Department of Financial Services assessed Assurant and QBE a total of $24 million in fines as a result of settlement in which the two firms agreed to substantively change their rate policies.

In Florida and California, the companies were forced to lower their rates after the states found that the FPI rates did not comply with state law.

Besides Assurant, QBE and its Balboa subsidiaries, regulatory actions involved such banks as MetLife Home Loan, Wells Fargo, HSBC, J.P. Morgan, BankAmerica and Citibank.

Ground zero for the lawsuits is the Federal District Court in Miami. A settlement in February against J.P. Morgan involving up to 1.3 million homeowners was estimated to be worth $300 million, with lawyers expected to get $20 million.