On May 24, plaintiff Jolanta Rozwadowska filed the putative class action in Cook County Circuit Court against Seterus Inc. and QBE First Insurance Agency over the alleged kickback scheme.
Rozwadowska is represented in the action by attorney Thomas A. Zimmerman Jr. and other attorneys with the Zimmerman Law Firm, of Chicago.
According to the lawsuit, Rozwadowska, described only as a resident of Illinois, owns a home in northwest suburban Hoffman Estates. The mortgage on that home was serviced by Seterus, the complaint said.
According to public records, the mortgage on the property was modified in 2014, and assigned to Fannie Mae. Seterus serviced the mortgage on behalf of Fannie Mae. In 2015, Fannie Mae filed a foreclosure lis pendens notice with Cook County against the property, public records said.
While Seterus was servicing Rozwadowska’s mortgage, the lawsuit said she allowed her home insurance coverage to lapse. Under the terms of her mortgage contract, this allowed Seterus to then select a new insurer to cover the property, and force her to pay for the coverage.
This so-called “force-placed” insurance coverage is standard practice for Seterus and other home mortgage loan servicers, who require the insurance to cover their investment against hazards, the complaint said.
However, while the language of the contract authorizes loan servicers, like Seterus, in the event of a lapse of coverage, to purchase “reasonable and appropriate” insurance policies to cover the home, the lawsuit said Seterus and QBE “have an exclusive arrangement,” under which “QBE First monitors Seterus’ mortgage loan portfolio to identify lapses in coverage or inadequacy of insurance.”
When such lapses are found, the lawsuit said, Seterus allows QBE to buy the insurance, and Seterus includes the premium in its borrowers’ mortgages.
However, the complaint said in Rozwadowska’s case, and in the case of potentially thousands of others homeowners in Illinois and elsewhere, Seterus “abused the discretion” granted it under the mortgage loan agreement, force-placing insurance policies that are overpriced because, according to the complaint, “a considerable portion” of the premium charged to borrowers is “kicked back to Seterus and/or QBE First.”
Rozwadowska said Seterus and QBE notified her in February they had charged her $2,074 for a year of policy insurance, deducting that amount from her escrow account or adding it to her mortgage loan, if the amount in escrow was too little.
The lawsuit asked the judge to sign off on creating a class of plaintiffs including every homeowner on whom Seterus and QBE has force-placed an insurance policy, as well as a special subclass limited to Illinoisans whose mortgages were serviced by Seterus and for whom Seterus also purchased insurance coverage.
The complaint alleged violations of Illinois consumer fraud law and the federal Truth in Lending Act, as well as breach of contract and unjust enrichment, among other counts.
The lawsuit asked the court to award actual and punitive damages, plus attorney fees.