Homeowner’s coverage reduced by mortgage company?

Parent Cafe
1

<p>First, I’m not making this up, although, to be honest, I’m still having difficulty believing it.</p>

<p>My homeowners’ insurance is paid through my mortgage company - I pay the escrow, they pay the insurance. So, every year in April, my insurance carrier sends a bill to the mortgage company, the mortgage company pays the bill, and that’s that. Until this year.</p>

<p>This year, the bill sent to the mortgage company was different. Instead of saying, “Pay This Amount,” it said, “You have a choice. You can pay (a) your usual amount or (b) this discounted price.” The bill then goes on to explain that if the homeowner accepts the discounted price, the homeowner’s deductible will increase by some fifty percent.</p>

<p>The mortgage company paid the discounted price, and my deductible increased accordingly.</p>

<p>Problem is - no one asked me. And last time I looked, it’s my house and my coverage. And if I wanted a higher deductible, then that’s what I would have contracted for when I bought the insurance in the first place.</p>

<p>So I call the insurance company. Their response? “It’s not our fault. We gave you a choice and you chose the discount.” Well, no, I didn’t. My mortgage company did.</p>

<p>So I call the mortgage company. Their response? “Well, it’s not our fault. They sent us a bill and we paid it. How were we supposed to know you wanted us to pay the higher price?”</p>

<p>In case you’re wondering, I discovered all of this by accident. The insurance company didn’t send me any notice that my coverage had changed, and the mortgage company won’t send me notification of payments made from escrow until next January. I only found out because I called my insurance company to inquire about adding my son to my auto policy. Otherwise, who knows if I ever would have discovered the change!</p>

<p>This just happened, so it can be fixed. I’ll just pay the difference. But what about next year? And the year after? The insurance company says it’s going to continue sending “multiple choice” billing statements. The mortgage company says it’s going to continue paying whatever’s on the bill - it happens automatically and there’s no way to flag the account to alert them to pay the higher price.</p>

<p>Really? This can’t be right . . . :(</p>

2

<p>Our mortgage company shows money in and out each month on the second page of our statement. Our homeowners is the opposite of yours- they raised the premium by 20% and upped the replacement cost. H called them on it last year when they did the same thing. They started using a computer program that recalculates the home value each year but it uses data that isn’t correct as their starting point so H has to call and correct it each year now. I guess it forces us to pay attention to that bill when normally we wouldn’t since the mortgage company pays it from escrow.</p>

3

<p>Is there some reason that you have to pay your insurance via mortgage escrow? I’ve always just paid my real estate taxes and insurance directly. Do your loan terms require the escrow? </p>

<p>If you are stuck with the escrow, can you set up an online account with the insurance company - where you can check your balance and the bills? Maybe you can work it out with the insurance agent, so you just pay the difference between what the mortgage company pays and the amount that buys the higher deductible each year.</p>

4

<p>I think it had to be paid from escrow initially. Now it doesn’t, but, to be honest, I’m just as happy not having to bother with it. But you’re right, if this can’t be fixed, I’ll just start paying it myself. I guess that makes sense. And it’s easier than changing insurance carriers.</p>

<p>I still can’t imagine that either one of them, though, should be allowed to reduce my coverage without my authorization.</p>

5

<p>Since most errors in mortgage servicing have to do with escrow or impound accounts for property tax and insurance, it is advantageous for home buyers to pay those bills directly, if they are able to handle bills of that size.</p>

<p>What probably happened in your case was that some low level employee at the mortgage company dealing with the insurance bill did not want to bother going through a special procedure to ask you what your choice was, so s/he just chose what s/he guessed you would want (the lower premium).</p>

6

<p>I was able to pay directly without escrow with one mortgage holder but the 2nd one in sister they pay insurer and taxes. Never had the experience you did with insurer and bank changing the deductible. I’d put the renewal date in my calendar and call insurer a few weeks before premium is due and inquire. Would just as soon pay directly if bank would let me and not have this mess. </p>

7

<p>I’ve been in my house for 6 years now. This is the first year the escrow was right. It’s has been everything. The township screwed up my taxes. I changed insurance, escrow company paid both even though I canceled one and was told no statement would go out (it did, they paid). It went on and on. </p>

<p>Advice, change insurance companies. If they can’t do what you want, shop around and find a company who can. My insurance company sends out a notice to me of our insurance and our coverage every year even though insurance is paid through escrow. It’s stamped do not pay, bill sent to mortgage company. </p>

8

<p>You should receive a copy of your policy Declarations page every year when your policy is renewed. It will list any new endorsements as well as changes to deductibles or limits. If you don’t receive that you should complain. A quick check of that will let you know what has changed.</p>

9

<p>dodgersmom – that’s awful! Definitely contact the servicer and ask if you can not escrow for insurance. Usually mortgage companies will let you drop the escrow account if you request it. They usually require escrow for both property taxes and insurance if your loan to value is over 80%, but if you have 20% equity you should be able to remove it. You can also complain to the entity that regulates your mortgage servicer. I’ve got to believe there is some notification process they skipped. This doesn’t sound right.</p>

10

<p>When we had a mortgage we always paid our insurance and taxes ourselves. Unless something has changed, as the poster above said, if you have more than 20% equity you should not have to escrow those bills. Besides, why pay that portion each month to the mortgage company. Keep it in your bank account, save up for those bills and pay them yourself. YOu’ll get the little bit of interest on that $ as well.</p>

11

<p>I’d stay on top of this. I had an acquaintance whose home was destroyed by fire and he had a very difficult time being paid anywhere close to what he expected to be paid based on his coverage. </p>

12

<p>Mortgage companies are idiots, I’m convinced. Our insurance company is on record with them, and has the mortgage holder address (it’s a very small home equity line which is about 5% of the value of this property).</p>

<p>Every year for the past several years, we have gotten a love note from the mortgage holder telling us we don’t have homeowners. Every year the insurance company has already sent the new declaration. Every year I call them. It’s annoying.</p>

<p>But this year, it had a new twist. It said that if we did not get them our declaration (by a date that was prior to the receipt of their letter…another annoyance), THEY were going to purchase our homeowners for is…and the cost was exorbitant. </p>

<p>My insurance company sent them a second copy of the declaration…but really…what happened to the first one? </p>

<p>Idiots!</p>

13

<p>I would consider switching companies. This mistake could have had serious impact on you, their customer.</p>

<p>If you are otherwise happy with their service, have them send the bill to you and then forward the bill, along with directions as to which option YOU choose, on to the lender. Had somebody with a functioning brain at the mortgage company considered the question at hand, they would have contacted you or known to keep the deductible as is! Remember, the people who make these errors are clerical workers who will continue to get their paycheck (small though it may be) whether they make the customer happy or not! </p>

14

<p>The mortgage company is interested only in protecting itself. They only care that there is enough insurance to cover the balance on the mortgage if something happens to the house.</p>

<p>I would immediately cancel the escrow if you can. If not, I’d refinance with a company that would allow me to pay the bills directly. No one cares more about my money or my coverage than I do. I want to be on top of it.</p>

15

<p>Well Fargo gave us that choice a year ago. They had already paid a lower amount, but the insurance company (State Farm) sent us a copy of the statement and said that we could pay the difference for that year, and that they would then bill Wells Fargo the higher amount for this year and all subsequent years. This year’s statement from SF showed that we had the more expensive, more comprehensive coverage that we asked for.</p>

<p>Call your insurance agent and ask if you can do something similar.</p>

16

<p>Just an FYI. We do NOT escrow our insurance or tax monies. Our mortgage holder still threatened us with buying a policy in our name, and sending us a bill…even though we had already had the new declaration sent to them.</p>

<p>If this happens one more time, we are getting a home equity lone elsewhere, and will close out this account.</p>

<p>I just think they are very cavalier with other people’s money, and make false assumptions without asking. </p>

17

<p>Just out of curiosity, what is the deductible difference? These days insurance companies often financially punish people that file claims and it often isn’t worth the trouble to have a low deductible. Your claim will be paid but your insurer will report you to the CLUE database and possibly increase your premium.</p>

<p>Edited to add - I’m not implying that you shouldn’t be angry about the mix up.</p>

18

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<p>Yes, this. We haven’t had a mortgage for a long time, and never paid taxes or insurance through escrow, but the insurance company is required to send this at each renewal so you should be able to check the coverage details each year. Setting up an online account is a good idea, as someone mentioned earlier. We have one for our second home and are able to pay the premiums via CC which is easy and convenient, as well as keep track of our policy, coverage, etc.</p>

19

<p>Mortgage companies most likely put most of their resources into writing new loans and as litle as possible into servicing them. So do banks. Hence the inability to properly process foreclosures and short sales and so forth.</p>

<p>Unless you know that you, personally, would have a hard time keeping sufficient funds available to pay the premiums, I would get out of the escrow ASAP.</p>

<p>If not, as Calmom suggested, signing up for online account access–and possibly online delivery of your annual statement–will help you keep track. </p>

20

<p>OP - We have our insurance paid through escrow. However our insurance always sends a bill to both us and Wells Fargo. I always call Wells and and ask if they received the bill and when they are going to pay it. If there was an option like you described then I would know about it when the bill came. I would change insurance companies. You should be receiving a billing statement along with the mortgage company. If they can’t send you a bill I’d start to wonder where else they were cutting corners…</p>