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They'll force you to buy a more expensive homeowner's insurance policy

forced-place insurance

Sometimes the deck seems stacked against you when you seek affordable insurance.  Homeowners who fall behind in their home insurance payments face an expensive threat. Your mortgage lender has the right to obtain another insurance policy for your property – and bill you. “Force-placed” insurance has exploded in recent years, according to consumer advocate Birny Birnbaum, nearly quadrupling in six years.

Lenders will also stop paying home insurance premiums out of escrow when homeowners fall behind on mortgage payments, and then provide force-placed insurance.

But force-placed insurance benefits banks, which often funnel the business to insurance units that are part of their own company or make deals with other insurers in which both profit -- particularly when the new policy costs five times as much as the old one. Banks make "hundreds of millions of dollars" on these commissions, according to Birnbaum, the executive director of the Center for Economic Justice.

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