Consumer complaint received 2018-02-06
Company: Selene Finance LP
State: IL
Product: Mortgage
Sub-product: Conventional home mortgage
Issue: Trouble during payment process

Complaint:
Selene Finance Mortgage & Account # XXXX, Property - XXXX XXXX XXXX, XXXX  XXXX, XXXX, FL XXXX Dear Consumer Financial Protection Bureau : Thank you for being available as a critical vehicle to aid consumers subject to unethical and illegal practices employed by loan servicers. Unfortunatly now my lender, Selene Finance, is employing such practices through their force placed insurance practices. I am a Selene Finance customer whose mortgage Selene purchased, and has been, and currently is, in good standing regarding my loan repayment. 

Prior to last Spring, Selene Finance, as well as the prior servicers of my mortgage, concluded my association master policy provides sufficient insurance coverage to adequately protect the mortgagors interest in the property. 

By way of background, my unit is a small two bedroom, less than 1100 square foot condominium, in a 32 unit multi-unit building. Never in my 13 years of ownership has the master policy, which provides coverage for the entire building in the amount of approximately {$3.00}, been found insufficient by either Selene, or the prior servicers.

In recent letters, the most dated XX/XX/XXXX, Selene demands I purchase an additional HO 6 policy. In addition, Selene has force-placed insurance against me charging {$2800.00} on an annual basis, an increase of nearly {$230.00} per month in my monthly housing costs! 

This action, if imposed, is without merit on multiple legal, equitable and financial fronts. First, Selene contends it may require insurance for the difference between my loan balance of approximately {$160000.00}, and {$110000.00}, a sum approximately of {$50000.00}. Selene contends it may require this because the HOA policy provides {>= $1,000,000} coverage, and dividing this amount by the total number of units in the building ( 32 ), results in coverage of approximately {$110000.00} per unit, in the event of a complete destruction of the building. Hence, Selene contends, it may require I purchase an additional {$50000.00} in coverage, or it will force place such coverage, and charge me the sum of {$2800.00} per year. 

First, Selene states in its XX/XX/XXXX letter that your hazard insurance policy expired, and we dont have evidence you obtained new coverage. Directly contradicting this statement are the actions of myself, and the XXXX XXXX XXXX. On 3 different occasions, XX/XX/XXXX, XX/XX/XXXX, and again on XX/XX/XXXX, we provided per Selenes request the governing master policy, which provides complete hazard insurance under a policy in force until XX/XX/XXXX. Clearly this statement by Selene on XX/XX/XXXX, when it had been provided proof of hazard insurance on XXXX different occasions, plainly violates Section 2605 ( k ) ( 1 ) ( A ) of the Real Estate Settlement Procedures Act ( RESPA ). 

Specifically this section prohibits Selene from obtaining force placed insurance if it has a reasonable basis to believe the borrower has complied with the mortgage/note requirements to maintain property insurance. 12 USC Sect 2605 ( k ) ( 1 ) ( A ). I reiterate, in XX/XX/XXXX I dutifully provided through the XXXX XXXX the complete Hazard insurance policy detailing extensive property replacement coverage. In addition, in XX/XX/XXXX on 3 different occasions I again provided the master policy expressly providing insurance coverage of my unit. Moreover, said coverage was acceptable to Selene in XX/XX/XXXX, and with each of its predecessors. Accordingly, Selene had no basis to conclude I failed to comply with our loan agreements insurance provisions, and now impose force placed insurance, in direct violation of 2605 ( k ) ( 1 ) ( A ) of RESPA.

As you may be aware, the Consumer Financial Protection Bureau enforces this and other governing regulations, in order to protect borrowers from unwarranted force placement of insurance when a servicer lacks a reasonable basis to impose upon on a borrower. 78 Fed. Reg. 10,712 Second, under the terms of our mortgage loan agreement, Selenes legally secured interest is limited in the event of default and foreclosure to ownership through a foreclosure proceeding and, if ultimately successful in that action, physical possession of the unit. Nothing in our contractually binding agreement expands Selenes interest to the right to any chattels/furniture or other personal property of the borrower in the unit in the event of a foreclosure and transfer of possession to Selene. Nor does any term in the agreement provide Selene, or its predecessors, the right to employ the above formula, require the borrower to purchase insurance Selene deems necessary on any purported coverage shortfall, or impose force placed insurance in the amount noted above if the borrower does not submit to Selenes insurance purchase demands.

In addition, well settled Federal and state law in all 50 states mandates, due to the unequal bargaining power between the parties that construction of such agreements is against the lender/servicer, and in favor of the consumer/borrower. Imposing such insurance coverage, based on a formula wholly absent from the agreement between the parties, exceeds Selenes rights well-beyond the intent of the parties, inventing such a right from whole cloth well-beyond what the parties agreed to, and memorialized within the four corners of the governing loan modification agreement. 

Indeed, Selene is so limited to only a transfer of ownership and possession through foreclosure of the unit, and not to unit contents in the event of default by the borrower. Thus it has no legal right through such foreclosure to take ownership of chattels/personal property. Accordingly, because Selene has no legal right in the event of foreclosure to acquire and possess the borrowers chattels/personal property, it can not require a borrower purchase additional insurance coverage on such items it lacks any legally secured interest therein. 

Provided & attached through your document portal are : 1. The master policy providing just under XXXX  XXXX in replacement cost coverage for the XXXX XXXX building ; 2. Proof the policy was provided to Selene on 3 separate occasions this year when requested by Selene. T hank you in advance, and to those reviewing these issues, for your thoughtful consideration.  Unfortunately, Selene 's response to this issue has compelled me to bring this matter to the Consumer Financial Protection Bureau ( CFPB ). 

Very truly yours, XXXX XXXX XXXX, XXXX.

Company response to consumer: Closed with explanation