Bank Of America, Nationstar Face Forced-Place Insurance Suit

Bank Of America, Nationstar Face Forced-Place Insurance Suit J. Albert Diaz Sarah Alhassid

Sarah Alhassid needed to come up with a way to pay the mortgage on her tiny Aventura condominium. So in 2007, like many seniors, she tapped into her home equity and obtained a reverse mortgage.

It was supposed to take a very large monthly bill off her desk.

Instead, Alhassid claims she found herself mired in a forced-place insurance scheme that resulted in a foreclosure lawsuit even though she never missed a mortgage payment, the 69-year-old woman claims in a class action lawsuit.

“I feel very angry for what they are doing because the real estate taxes have been paid. I make my maintenance payments. I have been doing everything I am supposed to do, and there is no reason for them to do this to me,” Alhassid told the Daily Business Review. “They are trying to take away my home, the only thing I have left. I know there are a lot of other seniors out there in the same situation as me.”

Bank of America Corp. in 2009 purchased without her consent a flood insurance policy for $6,500 even though she said her unit was covered by the Mystic Pointe Condominium Association. The complex’s 250-unit insurance policy cost $20,000,

When she balked at paying for the policy, Bank of America placed her loan in default status and sold it to Dallas-based Nationstar Mortgage LLC. A subsidiary, Champion Mortgage, offers reverse mortgages.

Alhassid’s lawsuit filed Feb. 7 in Miami federal court claims Bank of America and Champion purposely targeted seniors with reverse mortgages by using force-placed insurance policies as a catalyst to file foreclosure suits and claim the property.

“BoA and Champion knew that plaintiff and others similarly situated had property insurance through their condominium owners associations,” according to the lawsuit filed by Miami attorneys Reuven T. Herssein, a partner at Herssein Law Group, and Maury L. Udell, a partner at Beighley, Myrick & Udell.

The lawsuit claims the loan documents contained a condominium rider specifying a requirement to maintain property insurance would be excused so long as the condo owners association had a policy.

Herssein said Alhassid repeatedly provided this information to Bank of America and later Champion on how her unit was covered through the association’s policy. She received reassurances the problem was handled only to find Champion moving to foreclose on her property.

More Litigation

Alhassid didn’t purchase her reverse mortgage through Bank of America. It was through Washington Mutual. The note then passed through Bank of America to Champion.

The case was assigned to Chief U.S. District Judge Federico Moreno, who has handled five other lawsuits brought against banks on the force-placed insurance issue.

Attorney Christopher Stephen Carver, a partner at Akerman who represents Bank of America, said he talked to his client and the bank had no comment.

Attorney Alan Greer, a partner at Richman Greer in Miami who represents Nationstar and Champion, also said he had no comment. John Hoffmann, Champion’s spokesman in Dallas, said the company doesn’t comment on pending litigation.

Force-placed insurance has been the subject of litigation against the country’s largest banks. They purchased above-market-rate homeowner insurance policies if there was a lapse in coverage and allegedly received kickbacks in the form of commissions or other benefits from insurance companies.

Florida was ground zero for forced-place policies after the housing bubble burst, accounting for 31 percent of the nation’s policies in 2011, according to court records.

There has been six court settlements presented in the last year, five of them in Miami with Moreno. The largest has been $1 billion in injunctive and compensatory relief with JPMorgan Chase & Co.

Targeting Seniors?

Bank of America settled with plaintiffs in Miami and a motion for preliminary approval is expected to be filed next week, said attorney Adam Moskowitz, co-lead counsel with Miami attorneys Aaron Podhurst of Podburst Orseck in Miami and Lance Harke of Harke Clasby & Bushman in Miami Shores.

Homeowner attorneys across the country have filed five recent lawsuits, including one against Nationstar. Moskowitz said plaintiffs want a single judge to handle all new force-placed insurance cases.

Moskowitz, a partner at Kozyak, Tropin & Throckmorton in Coral Gables, said if the allegations in the Alhassid lawsuit are true, “it would be something we certainly would be interested in investigating, and we have already been contacted about the allegations.”

Alhassid has lived in her one-bedroom, 857-square-foot unit in the complex on the Intracoastal Waterway since about 2004 when she purchased it for $235,000.

Herssein is convinced Bank of America and Champion wants to get their hands on the homes of the elderly. The 11-count complaint claims breach of contract, unjust enrichment, tortious interference and financial exploitation of vulnerable adults.

He said a motion has been filed to stay the foreclosure action as-signed to Miami-Dade Circuit Judge Norma Lindsey because of the pending class action.

“They are trying to steal her home,” Herssein said. “They are taking advantage that she is elderly and not legally sophisticated and she really doesn’t have the means to protect herself.”