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.
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.
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.MyImmigrationLawyer.info NOTE: Responses are for the education of the community at large and is not intended to be "legal advice." No attorney-client relationship is established by responses or comments.