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Financial Services Law Insights and Observations

CitiMortgage Reaches Settlement Agreement in Lender-Placed Insurance Class Action

State Issues

settlement was reached in a class action suit against CitiMortgage, Inc. in the Superior Court for the State of California, County of Los Angeles. In Rounds v. CitiMortgage, Inc., No. BC386656 (Cal. Super. Ct., Feb. 24, 2011) plaintiff alleged, among other things, that CitiMortgage allowed the assessment of excessive premiums in its lender placed insurance (LPI) program on California properties, purportedly in violation of California’s Unfair Competition Law, Business and Professions Code Section 17200, et seq. The settlement applies to California borrowers of CitiMortgage who paid premiums on LPI between March 4, 2004 and August 10, 2010 and whose insurance was not cancelled without charge to the borrower. The settlement provides for, among other things, a payment by CitiMortgage in a sum not to exceed $2,000,000 for settlement class members making valid claims, attorneys’ fees, costs and an incentive award to plaintiff. CitiMortgage agreed to permit each settlement class member to make a claim for payment of up to $95. With respect to CitiMortgage’s LPI program, from February 24, 2011, the date of the judgment granting final approval of the settlement, and for two years thereafter CitiMortgage agreed to maintain a rate of commissions on the placement of LPI to an affiliate of not more than 12%, and a fee in the amount of $.038 for tracking compliance with insurance obligations.

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