My mortgage company didn't pay my homeowner's insurance that is supposed to be escrowed and as a result it was cancelled

Asked over 1 year ago - Conroe, TX

I refinanced my mortgage under the making home affordable program and was informed that I would be required to escrow my taxes and insurance. The bank mis-coded my home and didn't pay the insurance so it was cancelled. Now they are telling me that they have recoded my house but my payment will go up when they escrow insurance. The problem is, the contract says my IPR was to be adjusted to 31% of my income but now it will be much higher than that and I can't afford it.

Attorney answers (3)

  1. Walter Wilbur Beuhler

    Contributor Level 14

    5

    Lawyers agree

    Answered . Typically the lender requires the improvements to be insured so that in the event of a loss (i.e. fire) of their security the loan will be paid. The escrow is required to ensure the premiums are paid so there is not a lapse in coverage. They usually do not require a specific insurance company or policy coverage beyond the improvements. Lender chosen or force placed insurance policies are usually more expensive. Lenders aren't concerned with what insurance costs because you are paying it. Another option to look into would be to shop for a policy with the minimum lender requirements. While this remove coverage for your belongings and other risks, it will lower the premiums.

  2. Cheryl Rivera Smith

    Contributor Level 20

    4

    Lawyers agree

    Answered . This is unfortunate and is why you should always check behind your lender to make sure that the bills are properly paid out of escrow. My advice would be to first try to work with the lender and the program to see if they scenario could be adjusted to fit your ratio. If that doesn't work, you could sue your lender in small claims court for the damages you incurred as a result of their negligence, but that will take time and a possible settlement may come to late to help.

  3. J. Thomas Smith Ph.D.

    Pro

    Contributor Level 20

    3

    Lawyers agree

    Answered . I don't see a question, here. However, you will either have to obtain insurance to cover the property or the mortgage company/bank will obtain it at a much higher rate and pass the cost on to you. You have few options here. If you "can't afford it," you have even fewer options.

    Law Offices of J Thomas Smith J.D., Ph.D 11500 Northwest Freeway, Suite 280 Houston, TX 77092 713-LAWYER-2 www.... more

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