You may remember the Anonymous/BofA leak from a few weeks back. We covered it here. Part 1 of the "leak" turned out to be just a few emails from a former Balboa Insurance employee. (Balboa was bought by BofA in the Countrywide acquisition.) But as an insider to the fraud machine, the leaker gave us a behind-the-scens peak at how banks and servicers use force-placed insurance scams to defraud borrowers.

Recently, the ex-BofA employee put together a post called Insurance Fraud 101, which explains in great detail how the force-placed insurance scams work. Basically, the servicer does everything possible to screw you over, even when you've done everything right and made every single payment on time. Some of the possible scenarios include:

If the servicer does not receive proof of insurance on a particular form by a certain date, an insurance policy will be force-placed on your home. They will not call you to ask for proof, they will simply subtract the force-placed insurance premium from your escrow account. If you don't have an account, they will create one and then bill your account for the amount of the insurance premium.

This one is really tricky. Even if you have an insurance policy, if the policy expiration date is more than 12 months away, the servicer will only list it as a 12-month term. At the end of the twelve months, unless you have again sent proof of insurance on a special form, guess what -- they will pretend your insurance has lapsed and bill you for the force-placed insurance. And no, they won't call you to double check beforehand.

If you get a random letter saying that the servicer has no record of insurance, you must provide a copy of your policy that is dated before the date of the letter or else the servicer will assume your policy has lapsed. Most likely the force-placed insurance policy will be back-dated, too.

The article lists a number of other possibile scenarios, but this is the ultimate take-away:

As you can see, without any intervention, miscalculation, or mistake on your part in any way, the banking and insurance regulations set for your bank have now caused your escrow account (whether pre-existing or not) to become negative, even if you already paid off your loan, due entirely to circumstances created by your bank. This occurs tens of thousands of times every single day in our country to honest and hardworking American citizens, causing many to have their home, vehicle, or investment property taken away from them illegally by the bank.

If you are in the position where you may lose (or may have already lost) your property, whether home, auto, or commercial, study any correspondence you have received from your bank. You may have the system-generated written proof of their fraudulent and illegal (per the Gramm-Leach-Bliley Act) activities already in your hand in the form of a force placed policy notification form where the effective date of the policy is older than the print date of the letter itself. Bring this to the attention of an attorney immediately.

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