A company with ties to the nation’s largest overseer of subprime mortgages announced under pressure Wednesday that it will stop collecting controversial insurance fees from homeowners whose properties were under foreclosure.
The announcement came three months after The Associated Press highlighted its business practices.
Shares in Altisource Portfolio Solutions S.A. of Luxembourg, a major subprime mortgage services provider, fell by more than 16 percent on the news, causing a drop of more than $200 million in the company’s value.
The AP reported in July that companies overseeing millions of mortgage loans appeared to be skirting new federal regulations intended to stop them from profiteering at the expense of troubled homeowners.
Altisource said Wednesday it will cease collecting commissions on “force-placed” insurance, a type of backup property insurance that its clients buy to protect the homes of otherwise uninsured properties.
The company did not say when it will stop collecting the fees.
After the market collapse in 2008, force-placed insurance became a multibillion-dollar industry as homeowners fell behind on their insurance bills. Banks and other mortgage servicers found a way to profit from the insurance.
After public scrutiny of the costs of the insurance billed to homeowners, major banks including JPMorgan Chase & Co. and Wells Fargo & Co. renounced such payments. In June, the Federal Housing Finance Agency formally banned mortgage companies from profiting on insurance that is billed to government mortgage giants Fannie Mae and Freddie Mac.
