A key lawmaker on Capitol Hill is not happy with a federal housing regulator's lack of action on a plan to rein in the cost of backup homeowners' insurance policies.
Rep. Maxine Waters of California, the top Democrat on the House Financial Services Committee, said in a letter on Thursday that she is not pleased with a move by the Federal Housing Finance Agency to reject a plan to lower the cost of so-called "force-placed" insurance. This kind of coverage is imposed on homeowners who let their homeowners' policies lapse.
Ms. Waters said the insurance is often overpriced, boosts debt owed by borrowers and imposes "unnecessary losses," on Fannie and Freddie. She sought "an outline of FHFA's plan, if any, on how to proceed with force-placed insurance reform."
An FHFA spokeswoman declined to comment.
Last year, Fannie lined up a consortium of insurers led by Zurich Insurance Group AG that would offer lower-cost polices for the insurance. The issue is important to Fannie because it gets stuck with any unpaid force-placed insurance bills after a foreclosure is complete. The proposed arrangement would save around $150 million a year, Fannie officials argued.
Earlier this month, the regulator indicated it wasn't sure that Fannie's approach would deliver the biggest cost savings. FHFA said it would work out a plan for both Fannie Mae and its sibling mortgage-finance company Freddie Mac.