GMAC Sued Over Requiring Excess Flood Insurance for Condos

GMAC Mortgage, LLC was hit with a proposed class action in Pennsylvania claiming it forced condominium owners to purchase excess flood insurance beyond what was required by federal law, breaching mortgage contracts and violating New Jersey consumer protection laws. Elizabeth Cronk, who owns a condominium in Secaucus, New Jersey, claims that GMAC routinely purchases excess flood insurance for owners of individual units and forces them to pay the premiums by tacking them onto their credit line balance.  GMAC purportedly sent Ms. Cronk numerous form letters explaing that she had to provide proof of flood insurance and purchase additional flood insurance in order to meet her obligations under federal law.  After several months of back and forth correspondence, GMAC placed Ms. Cronk in a flood insurance policy, withdrew that premium for her escrow account, and increased her mortgage payment.  The complaint for the proposed class action alleges that a typical homeowner’s ordeal with GMAC’s force-placed flood insurance begins with a notice from GMAC demanding proof of adequate flood insurance, continues with a series of letters asking for more information and explaining GMAC’s intention to force-place flood insurance, and culminates with GMAC’s purchase and forced placement of a high premium flood insurance policy.  Throughout this process, GMAC misrepresents that its requirement that homeowners obtain additional flood insurance at the homeowner’s expense is in line with federal laws for homeowners in “Special Flood Hazard Areas.”  The complaint for the proposed class action further alleges that GMAC force-places homeowners into insurance policies brokered through affiliated entities, including SouthWest Business Corporation.  These force-placed policies can cost four times as much as insurance policies that borrowers obtain independently.  Once GMAC forces a homeowner into one of its affiliate’s excessively priced insurance policies, it ensures payment of the premium by paying it and then withdrawing the bill from the mortgagor’s escrow account or tacking it onto the borrower’s credit line balance.  As a result, a condominium owner has no choice but to pay the premiums, because they become part of his or her loan balance, which means GMAC can make negative reports about the borrower with the consumer credit reporting agencies if the borrower fails to pay every penny that GMAC says the borrower owes.  The proposed class action was filed in the case of Elizabeth Cronk v. GMAC Mortgage, LLC, No. 2:11-cv-05161 (E.D. Penn).  The attorneys at Balkan & Patterson, LLP are experienced in class action litigation and will act to protect consumers against corporate wrongdoers. If you believe you have potential for a class action, please contact us immediately and we will review your case at no charge.

The law firm of Balkan & Patterson, LLP was founded in 2006 and is headquartered in Boca Raton, Florida, at 601 S. Federal Highway, Suite 302, with offices in Broward County. Mr. Balkan and Mr. Patterson can be contacted at (561) 750-9191. Additional information about Balkan & Patterson, LLP may be obtained from the firm’s website at www.balkanpatterson.com.