Escrow/Insurance Refund Question

[Mhyral]

What is the name of your state? North Carolina

I recently switched out my homeowner's insurance to another company and finalized the paperwork about 3 weeks before my old insurance was due to start a new annual term. I notified my old insurance company 2.5 weeks in advance of the start date, but apparently my escrow account had already sent out a payment for the new term to my old company.

I paid my new homeowner's insurance out of my own accounts, as my escrow account said they wouldn't pay out the second insurance. Not a problem, as I expected to get the refund from my first insurance company to replace it.

Shortly thereafter, I received a letter from my escrow account stating that the refund would be mailed to them, and if that created a surplus (which it most likely would since that would mean it hadn't paid out for ANY insurance this year), they would send me the refund at the end of the year. However, the refund check actually came to me. When I contacted the company, they said they had no way of sending it back to the escrow account.

My question is, am I legally obligated in any way to to send the check back to my escrow account for them to hold onto it for another 3-4 months? They have essentially paid out one homeowner's insurance policy, which seems like it shouldn't cause any issues. They have all the paperwork on the new policy and will start paying out to it through the escrow next year. I feel like I should be able to keep this refund check to replace what I paid out, but I don't know if there is a legal obligation on my part of any kind around the situation.

Anyone have any ideas?

[jennzenn]

I worked for a bank in the mortgage department and dealt with this issue many times. Yes you may keep the refund check because you did have to pay the new insurance company out of your own pocket. If you send the refund to the mortgage company what will happen is they will hold in escrow your funds until the time they analize your escrow account and determine you have excess funds and they will in turn send the money right back to you. The mortgage company already send that payment out of YOUR escrow and you paid the new insurance company out of YOUR pocket therefore any refund will be yours. Also, keep in mind your house payment should adjust accordingly to the cheaper insurance as long as your taxes or anything in your escrow account have not increased.

[HUD-1]

I agree, as long as your new policy is 1 year in term, is paid for out of your pocket, and your lender is aware of it, cash the check and keep the proceeds.