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When your mortgage company fails to pay your insurance out of escrow, what can you do?

Posted onMay 14, 2020
What happens if your homeowners insurance on your mortgage has been cancelled for failure to pay the insurance premium? Since your house is mortgaged, many people are required to pay money into escrow held by their mortgage company or bank. Frequently, mortgage companies put force placed insurance in place with a different insurance company because of their own failure to pay your insurance premium out of escrow, and it’s a lot more expensive and provides less coverage.

What can you do?

Answer: Your mortgage company made a big mistake here if the insurance policy was “escrow-billed”. Often, this problem may not surface until a homeowner suffers a loss and attempts to make a claim with his insurance carrier, only to find out that the policy lapsed for failure to receive a payment. The effects in that situation can be devastating, as not only are you dealing with what may be a catastrophic loss of property, you are left with little recourse without an Oklahoma mortgage escrow lawyer. Unfortunately, most mortgage servicers are huge entities, and you will more than likely get bumped around within their system indefinitely if you attempt to handle the problem on your own. Our first piece of advice would be for you to promptly contact a reputable attorney in your area who is well versed in these matters including insurance disputes, and mortgage servicer’s failure to pay insurance out of escrow.

As soon as possible, contact an Oklahoma mortgage escrow lawyer or Tulsa insurance dispute lawyer to assist you. If you’d like to go it alone, you will first need to contact your original insurance carrier and getting a new insurance policy in place, or ask to have your old policy reinstated if possible. If your insurance carrier won’t do this, you may have to pay for the pricier, bare bones coverage that the force-placed hazard insurance policy provides until you can find other true hazard coverage. Once you have new or a reinstated policy in force, send proof of the insurance policy declarations, along with a receipt/proof of payment to your mortgage carrier/bank via certified mail, return receipt requested, and also whatever fax number they provide you for delivering these documents. You will need to request that your mortgage company immediately cancel the force-placed insurance policy, and demand that they reimburse your mortgage account for the difference in the premium payments that they made to put the force-placed policy in force. If there is an increase in your new insurance policy’s premiums due to the cancellation, your mortgage company or bank should be responsible for paying the difference here as well.

Force-placed insurance coverage generally only covers the mortgage holder’s interest in the property, and not any equity you may have in the home, let alone the contents or other property and liability normally covered by standard homeowners insurance. Even worse, a mortgage company / servicer may often derive a financial benefit by failing to pay your insurance out of your escrow account, as they often own all or stock in the force-placed insurance company, and receive a kickback by putting a policy in place.

Wandres Law is well versed in Oklahoma insurance disputes and mortgage company mistakes. Contact us today for a free consultation.

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