Looking for advice on how to handle this and what my rights are.
We have a mortgage with escrow for homeowners insurance and taxes. Mid-year, our mortgage payment jumped from about $500 to over $700 due to what the servicer said was an escrow shortage related to insurance.
Fast forward to the new year:
I called my insurance company and found out our homeowners policy was canceled. The insurance company says it was canceled because the mortgage servicer did not pay the premium. The mortgage servicer says the policy was “canceled by the insurance company.”
Additional details that concern me:
The escrow account is now negative
The insurance renewal notice was dated 11/17 with a 12/11 renewal
The servicer raised our payment months earlier, mid-policy, claiming an insurance shortage
Despite the increased escrow payments, they still did not pay the premium and allowed coverage to lapse
We were uninsured for several days without knowing
My questions:
How could the servicer claim an insurance shortage mid-policy before the renewal was even issued?
Is a servicer allowed to let insurance lapse due to an escrow miscalculation?
What should I formally demand from the mortgage company (escrow audit, reinstatement, reimbursement, etc.)?
At what point should I file a CFPB complaint or other formal complaint?
Should I secure temporary insurance immediately even if reinstatement is possible?
I’m trying to make sure my home is protected and that I don’t get stuck paying for a mistake I didn’t cause.
Any insight from people who’ve dealt with escrow errors, mortgage servicing issues, or insurance lapses would be greatly appreciated.
Mortgage Company Failed to pay insurance
byu/nereusfreight inRealEstate
Posted by nereusfreight
5 Comments
Dude this is a nightmare scenario and unfortunately way more common than it should be. Your servicer definitely screwed up here – they can’t just let your insurance lapse because of their own miscalculations
File that CFPB complaint like yesterday, these companies only seem to move when regulators get involved. Also get temporary coverage ASAP even if it costs extra, being uninsured is not worth the risk
Document everything and demand they fix the escrow shortage they created plus any fees you incur from this mess
You can get out of escrow if you have a certain equity-to-loan ratio as well. Depends on your state I believe.
In the meantime, while you work to have this fixed with the mortgage company –
Can you ask the agent if the policy can be reinstated if you make a payment for a month of premium while you work with the lender?
I would pay the insurance company directly in order to reinstate coverage. If your mortgage company then also pays the insurance company, the insurance company will issue a refund/reimbursement to one of you (and if that reimbursement goes back to your mortgage company, it will go straight into your escrow account – or at least it should). You should be able to log on online directly with your insurance company – as you are their insured (unless your insurance was “forced-placed”).
Is all your contact info up-to-date with your insurance company? Because you *should* have gotten letters from your insurance company both before and after the cancellation; one letter that payment was late warning that the policy will be cancelled, and another letter saying the policy was cancelled.
You should complain IN WRITING via certified mail (as well as emails and regular mail) to your mortgage company. I would cc your state consumer affairs division; they should have an on-line complaint portal. Yes I would file a complaint right away with the CFPB.
Is your homeowner’s insurance “force placed” or “forced place”? That would be where the mortgage bank picks out your homeowner’s insurance for you. That is rather a different animal and so we’d have to discuss some differences if that is the case here.
Back when I had Countrywide as my mortgage lender, in the 1990’s, they failed to pay my homeowner’s insurance. I think Countrywide was doing funny things with mortgage payments in general, like investing them to make more money instead of paying the money out like they were supposed to. They would also apply my entire monthly payment to principal and then accuse me of not having made my monthly payment. It was crazy stuff and got resolved only by my selling my house and moving. We all know what happened to Countrywide in the financial crisis.
My question is who is monitoring shit in your household. There is no way to excuse being that clueless with your own finances. Sorry…this is on you brother, regardless of how screwed up others are.