We had refinanced a year ago and it was determined at that time we needed more flood insurance coverage to cover the amount of the loan. We got the additional insurance, then our mortgage was sold. 9 months later the new loan holder wants us to obtain more flood insurance (which our insurance agents assures us in unnnecessary) or they will obtain it themselves and put a lien on us. Is this legal?
2006-10-11 05:28:20 · 6 answers · asked by rebecca z 2 in Business & Finance ➔ Insurance
The loan holder (bank or mortgage) has the right to purchase the coverage in lieu of you doing it.
However, it is a real judgment call on how much flood coverage you need.
You might be getting confused between how much flood coverage you have and what your real risk of loss is.
You should assume that a flood could cause a total loss of your property and contents, realizing that the FEMA National Flood Insurance Program has a cap of only $250,000, which may or may not be enough to rebuild your home and replace its contents.
If your lender feels you need more coverage, you probably do, considering what's at risk.
Remember that if you suffer a total loss and you only have a partial coverage, you are going to not have enough money to rebuild AND you are still going to owe on your old mortgage.
So you should err on the side of safety and make certain you have enough coverage.
2006-10-11 07:46:40 · answer #1 · answered by markmywordz 5 · 0⤊ 0⤋
Most banks require you to have the flood insurance for at least the amount of the loan. Now some banks have started to change this. They want the flood insurance to equal the amount of coverage on the house. I have a bank that calls me once a year and asks that the coverage on the flood policy be increased to equal the homeowners amount.
2006-10-12 07:47:01 · answer #2 · answered by blb 5 · 0⤊ 0⤋
Legal yes but you have to get the agent involved with the lender to justify the increase. Have homes been going up that fast in your area? What has caused their concerns if you have enough to cover their deed of trust. These are the questions you should be asking them. You may have to get a new appraisal done in order to prove them wrong in their assumption. They may have run an AVM on the property to justify their concerns.
I am a mortgage banker
2006-10-11 05:39:55 · answer #3 · answered by golferwhoworks 7 · 0⤊ 0⤋
THE BANK CAN REQUIRE YOU TO CARRY FLOOD INSURANCE EQUAL TO THE AMOUNT OF HOMEOWNERS COVERAGE. IF YOUR HOMEOWNERS INCREASED, THEY CAN ASK FOR MORE FLOOD, NOTHING TO DO W/ SALE OF LOAN. THERE IS A 250K MAXIMUM FOR BUILDING INSURANCE, DOES NOT! COVER CONTENTS. UP TO 100K OF CONTENTS COVERAGE IS AVAILABLE, EXTRA COST. I SELL IT, DO THIS EVERY DAY.IF THE BANK BUYS FOR YOU, IT'S AT LEAST TWICE THE COST. CHECK THE FEMA, OR NFIP WEB SITES, TALK TO YOUR INSURANCE AGENT. ALSO, YOU ABSOLUTELY SHOULD ASK YOUR BANK WHY THEY REQUIRE THE ADDITIONAL COVERAGE. STRONGLY CONSIDER ADDING CONTENTS COVERAGE, AS YOUR "STUFF" WON'T BE PROTECTED WITHOUT IT. GOOD LUCK.
2006-10-11 11:07:03 · answer #4 · answered by Anonymous · 0⤊ 0⤋
The bank wants you to purchase enough insurance to cover the loan amount. If you don't, they will "force place" coverage for you, and charge you for it. If you don't pay it, they can forclose on the house.
2006-10-11 08:58:10 · answer #5 · answered by Anonymous 7 · 0⤊ 0⤋
On the face of it, I'd say no, but then again people with car loans are forced to have comprehensive coverage, so there may indeed be truth to their claim. I'd look into it, ask other banks, ask an attorney, ask local realtors.
2006-10-11 05:36:17 · answer #6 · answered by Anonymous · 0⤊ 0⤋