Mortgage Co. Failed to Pay Insurance!

[tubeguy]

What is the name of your state? Alabama

This is posted in the Homeowner's Insurance forum also.

Property damage as a result of Hurricane Ivan caused me to file a claim with my Homeowner's Insurance Company. You can imagine my shock when I was told that my insurance had been cancelled in June! The mortgage company failed to pay the annual premium in full and the insurance company took that opportunity to cancel the policy.

The insurance company says they sent me a letter but it went to an old address and was never forwarded by the post office. The mortgage company didn't contact me regarding any issue with my insurance either.

The problem was that the insurance company raised the 2004 premium by $68.00. The mortgage company paid them the amount of the 2003 premium. Apparently, the mortgage company was unaware of the policy cancellation, also. They admitted receiving a check for $1339 from the insurance company marked "refund for overpayment" and promptly deposited the money in their bank account (not my escrow account)! No bells or whistles went off to suggest that maybe there was a problem.

Now, the mortgage company has sent me a letter stating that they obtained forced insurance coverage on the dwelling because I had failed to keep insurance in effect on my property as agreed in the mortgage! To add insult to injury, they sent the letter only after I called them to find out what happened and what they were going to do about it! They placed a policy and took the money to pay for it from my escrow account. Of course, that policy does not include liability, personal property, or other structures coverage like my original policy did. In the meantime, I have losses that are not covered.

My question is about the fiduciary responsibility of the mortgage company. What laws, if any, pertain to the mortgage companies failure to pay my insurance? What recourse do I have other than taking them to court? I doubt that I have deep enough pockets to do that anyway. Any advice is appreciated.

[MortgageGuru]

Look at the paperwork from when you closed the loan. Those details are covered there. Look for a clause about when force placed insurance is to occur. If it is to occur immediately or anytime before you filed a claim then you should be covered by the lender's chosen insurer. File the claim with them and get your homeowner's insurance re-established with a normal policy.

[tubeguy]

MortgageGuru,

Thanks for the response. This mortgage company took over the loan when it was sold by the original mortgage company. In other words, the one that dropped the ball is not the one who held my mortgage when I closed on the property. So, the closing paperwork would have nothing to do with the current mortgage company. I will look in my records, but I believe that the only correspondence I have from the current mortgage company is a letter stating that they took over the mortgage and new payment coupons and escrow estimates.

Also, the forced insurance policy does not cover my personal property or provide liability coverage. It only covers the structure. Had they paid the premium as they should have, I would still have complete coverage. They are clearly culpable in their failure to pay and the result is my losses are not covered. Shouldn't they be liable in some way?

Thanks!

tubeguy

[MortgageGuru]

So, the closing paperwork would have nothing to do with the current mortgage company

Wrong. The company that bought the loan also bought the agreed upon terms and conditions. The terms of the escrow account are in there.