strange action by Chase Mortgage Co

[Fresh_Start]

sent us a letter out of the blue that our home insurance policy isn't sufficient.
It had replacement cost but chase wants increase over replacement cost.

It include wind and hail damage but chase wants it to have a specific wind and hail damage clause.
It has not hailed in this area in the 9 years I've lived here. It has only snowed 1/2" one time.

Strange to be having these discussions over a 8 year old mortgage, don't you think?

[amdezurik]

1. sounds like they want you personally

to bail them out by increasing un-needed fees and running up your bill.

[Fresh_Start]

4. Insurance company will charge us $48/year more

to have 20% slush over replacement cost to deal with building code changes.
Just a really strange communication.
Chase is getting $0 more.
Just shocked that they are actually reading the home insurance policy again years after they gave us the mortgage

[amdezurik]

6. multiply that by a 100k or more

depending on how many Chase holds and the ins company could make out like a bandit (uh, is there a difference now?), the thing is these days there is no way to know for sure if there isn't some interlocking going on between the two.

[Fresh_Start]

8. its not going to Chase

I'm paying the insurance company the incremental.

[yellowdogintexas]

14. the lender does not care how much money the insuror is making, just that the house

can actually be replaced if destroyed, from the proceeds of the insurance check.

Many homeowner policies have auto upgrades built in for increased replacement cost.

Lender doesn't care anything about contents, deductibles, liability or any of that stuff...just that the payout will sufficiently replace the house with equivalent value. They are protecting their interest should the collateral for the loan be destroyed.

[amdezurik]

23. all I will say in reply is

that while i phrased it a bit akwardly I was speaking of the ins company(ies) not Chase so much. but once again i doubt any of us here knows who may or may not be an interlocking director of both (if any I hasten to add)

[yellowdogintexas]

35. that would only be applicable if and only if the lender stated the coverage could

only come from a particulare insurance company.

Lender also does not care who underwrites your coverage, just so you have it

[leftofcool]

2. Maybe not so strange considering

the amount of damage to much of the US with tornadoes and hurricanes, not to mention fires and floods. They are probably just trying to recoup losses

[Fresh_Start]

5. CA is not hurricane or tornado country (so far)

I'm not even remotely in a flood zone: its actually a desert climate and the bodies of water which might flood are miles away and hundreds of feet lower in elevation.

All of California is probably a fire zone.

[amdezurik]

7. yup, high winds and it can be very rainy

Here in the SF bay Area anyway, but no typhoons or tonados since I moved here almost 30 years ago. Fire, now that is a real issue here.

[Fresh_Start]

12. I'm east bay

and it can be windy here.
But wind and hail are covered as standard hazards.

Obviously I'm on my own if we have earthquake damage. But we've retrofit and braced everything that can be braced in furnishings.

[Virginia Dare]

9. Insurance companies are gearing up for global warming..

they're already getting their ducks in a row, if our government isn't. The same thing happened before this current financial crisis. They protected themselves first, had all the bankruptcy laws rewritten.

[yellowdogintexas]

11. that would be it. Consult with your insurance agent. You may find this is not

the only mortgage company that is doing this.

Think of it this way:
you have a house that was originally mortgaged for $100K
you have a remaining mortgage balance of $75K
you are insured for $125K
Current replacement cost in today's market for same size house is $175K

house is destroyed
insurance writes a check to you and lender jointly for $125K and $75 K clears out the mortgage.

You don't have a lot left to replace your house.

Raise the insurance.
Shop around, talk to other agents
Get the best quote possible for the coverage your lender requires.

This is a requirement of the mortgage, stating the lender may adjust the insurance requirements as is deemed necessary, and is probably something they weren't enforcing too heavily but after all the losses of the past 4 years are finding many many homeowners are underinsured.

This happened about a year ago with required flood insurance in mandated flood zones. Folks were not carrying enough to replace their houses.

[Fresh_Start]

16. The policy already had replacement costs

which already was written to increase based on rising costs for replacement.

I find the hail damage requirement hysterical on their part.
This geography rarely goes to freezing, doesn't have snow, doesn't have thunder showers (less than 1/year since I've been here): what type of ridiculous is it to require hail coverage (which is in the policy already anyway)?

[yellowdogintexas]

34. now that is pretty strange. but in some states, wind/hail actually has to be

carried separately, and MOST policies in the rest of the states do include it; we just used to have to verify that it was part of the general coverage

Which gets back to the insurance clause in the mortgage, while the lender makes no money from the upgrade, they can change requirements to protect their interest.

And good you didn't have to have much of an increase to get it.

[WillowTree]

39. It doesn't have to be freezing weather for it to hail.

We had a terrible hail storm here a few years ago in August. Did an incredible amount of damage to thousands of cars and homes. Atmospheric conditions at very high altitudes where hail actually forms can be far different from what's going on on the ground.

[Fresh_Start]

45. I know that which is why I said that we don't have

thunderstorms either.
Usually the hail in non-freezing weather is associated with thunderstorms

No one told me before I moved here, that I wouldn't have thunderstorms. It was a nice surprise.

[Fresh_Start]

46. I found something called a weather risk index

for my town the "hail risk" is 0.
for my town the earthquake risk is over 400 (though why weather risk counts earthquakes is beyond me)
hurricane risk is 0.
tornado risk is 14.

for austin texas
the hail risk is 231

Honestly the "hail" request was ridiculous

[WillowTree]

40. When you say "repacement cost"...

....are you referring to the fact that the policy specifies that it pays the full cost to repair partial damage to the house with no deduction for depreciation or are you saying that you have the amount of coverage set at the full replacement cost of the house?

And if the latter, are you basing your determination of replacement cost on what it would cost to buy another house just like it or what it would cost to rebuild the house from the ground up with materials of like kind and quality at today's prices in your area? There can sometimes be a huge difference between the two if the house is more than 15-20 years old, particularly if it's brick or other masonry construction, and insurance companies and mortgagees are looking for coverage contemplating rebuilding.

[Fresh_Start]

43. it had replacement cost which escalated

coverage that automatically adjusts each year in an effort to compensate for increases in construction costs in your area.

the additional rider which we added was to cover the cost for future building code changes affects on replacement costs
its a wood frame tract house, nothing architectural to preserve
the property is spectacular and the reason we purchased the home

[Greyhound]

3. Kind of makes you wonder just who's property this is, doesn't it?

They come in, well after the contract has been entered into and with no cause, and simply directs a change in terms?

They are doing everything they can to frighten people as much as possible.

[Lance_Boyle]

10. 8 years into a 30-year mortgage it is very much the lender's property

and the lender has an interest in making sure that the property is adequately insured. If the OP pays insurance through an escrow account held by the lender, it is very possible that the insurer contacted the lender rather than the borrower to discuss policy shortcomings. This is one reason why its better to put up a down payment sufficient to escape escrow for insurance and taxes. That was 20% when I bought my house.

[Fresh_Start]

19. no escrow no PMI

20% down fixed rate mortgage from the get go.
We're not subprime or risky.
This is our 4th home (not simultaneously but sequentially as we moved)
We had purchased our second home using Chase and paid off that loan 14 years ago so they have had a long term experience with us.

The mortgage is less than half the current (reduced market value) of the property. We've always paid ahead on the mortgage and we've been in place and done substantial improvements.

[Lance_Boyle]

26. well now THAT is strange

But you mention substantial improvements... could that have triggered a coverage review? But even so, it's odd that with no escrow, the lender would be the one to contact you about it...

[Fresh_Start]

27. thats what I said, its very strange

our insurance company will make Chase happy by faxing them whatever they need so they stop yapping.

An in truth, I didn't have a problem with reviewing the replacement cost coverage.
It was the request to prove "HAIL" coverage which struck me as incredibly strange.

Without below freezing temperatures and absent thunderstorms its difficult to have hail.
So why "HAIL" coverage?

[yellowdogintexas]

20. this would happen whether the homeowner had escrow account or not. When there

is a mortgage, there is a required insurance level for reasonable replacement costs. Period, paragraph. It is IN THE MORTGAGE, that the lender may change the insurance requirements as is deemed necessary.

The insurance company HAS to send a declarations page detailing the insurance coverage to the lender every year until that mortgage is paid off. Now normally reasonable replacement costs are left up to the insurance agent as they are very up on local needs and trends. It may be the OP did not have an automatic increase feature in the insurance, causing the coverage to keep up with actual replacement costs.

The lender KNOWS what the original appraisal value was, it was put in their system when the mortgage originated. The amount of coverage held by homeowner is updated annually when policy renews. The replacement cost is the variable and is what triggered the letter. These things are reviewed by the lender, so when the last update came in from the insuror, the system would show that the replacement costs hadn't changed in the coverage for a certain period of time.


Protecting their interest, expecting the collateral to be preserved.

[Greyhound]

22. The OP states that replacement cost is covered and there is no reasonable justification

to alter the contract.
:kick:

[yellowdogintexas]

36. I got her reply to me, I went away to another room in the board and came back

the lender still has the right to require changes in coverage as it deems necessary.

Agreed, wind and hail is a weird specification.

Here it is included in all coverages unless you live on the coast and it is actually a separate coverage in that event, because the $$ in standard wind/hail just won't hold up in a hurricane prone area

[prolesunited]

13. Until the loan is paid off, it legally does belong to the bank

Just like you don't get the title to your car until you've paid it off. It sounds like the bank is trying to minimize risks and if there is a catastrophe, the OP will benefit as well.

To the OP: I'm glad it didn't cost too much to comply. Hope you never need it.

[dkofos]

15. Join the local Credit Union and refinance. Say FU to CHASE.

[yellowdogintexas]

21. sorry Credit Union would have same requirements. nt

[dkofos]

25. Not mine

[yellowdogintexas]

37. no requirment that your insurance meet a certain specification?

That is fairly standard mortgage language.

[Fresh_Start]

28. when we bought the home, our credit union

wasn't offering jumbos.

Now they do so we thought about refinancing with them.
But I didn't want to make any changes with the craziness going on right now.

[AlCzervik]

17. that's kind of weird. I just redid my homeowners policy about a year ago-on my own

after seeing my neighbor's house burn down, engulfed and gone in 7 minutes. Anyhow i called my agent and we redid the policy, it was about another $50 per year.

I use Farmer's btw, i know some people don't like them but honestly i have had great service from them, when my car got stolen they sent me a check and i did not get screwed, whenever i have any question at all i call my agent and he responds right away.

[AndyTiedye]

41. Farmers Was Great Until they Non-Renewed My Policy

[woodsprite]

18. I don't know who hold my BIL's mortgage, but they just sent him

a letter saying they dropped his coverage because there was no way they could rebuild his brick house for what it was insured for. He just bought the house and he had to have an escrow account set up, which was witholding what would have been the old policy amount. The insurance company didn't come out and appraise the house BEFORE the sale went thru - now he's been in the house 3 months. He said he'd pay the difference in the policy out of pocket, but they didn't want that, they wanted him to double his escrow account.

He's in touch with the insurance commissioner and he's also in contact with the real estate lawyer that handled the deal. Right now, he's got a 200K loan and no mortgage insurance.

BTW, this is in Delaware.

[yellowdogintexas]

24. what the lender did was place Lender Placed Coverage on the house. All he has to

do is go out and get private coverage ASAP. He will then be cut off from the higher payment. Lender Placed Protection is very very costly and only covers the amount of the mortgage. Once he replaces the LPP, and the new premium is confirmed paid, whether by escrow or the homeowner, then he can get the escrow reanalyzed..

The date the cheaper coverage takes effect will cancel the Lender Placed Protection and a prorated refund will post in the escrow account. He will still owe the prior premimums but the escrow will reduce because the current and future premiums are much lower. The escrow account can be deleted if he has proof of coverage and no other requirements to maintain an escrow account, but if he has to keep it, the payments can be reduced, once he does these things.

When the LPP is placed it has an effective date of the first date it is known there was no coverage on the house. Let's say June 1. $3000 per year premium. When the escrow is set up, the escrow account has to include not only that monthly amount but the shortfall that is occuring because the coverage goes back to June and it is now October, and the premium which will renew in June 09 if he doesn't replace the lender's coverage. So his new coverage starts in Oct. He still owes LPP from June to October, but that is all. He can pay the shortage into the escrow but the future calculation for payments will stay on there until he gets regular insurance .

He has coverage, eff w/the date of "no coverage". Lenders are supposed to send correspondence advising you they believe you have no coverage, and advise LPP will be placed, and give you 45 days to get your own, or advise them what you do have before they actually order the coverage. Then you get a second letter with another 45 days before they actually bill it to you, and usually there is another 30 days before it actually impacts the monthly payment. He probably got the letters and thought his agent was taking care of it when actually he wasn't.

I spent 3 years servicing escrow accounts for a major lender and this stuff happens a LOT, usually because the agent drops the ball, or homeowner changes coverage but somehow the info just never gets to the lender and the cancellation of the old plan comes in but the new plan info does not. Or the homeowner pays insurance monthly and the carrier sends out automatic cancellations to the lender if the payment is 15 seconds late.

I can't tell you how many times I was able to resolve it just by getting the agent to fax over the declaration page when the homeowner got the coverage corrected, and fix the monthly payment right away. The amount of payment reduction will vary according to how long this has gone on and the amount of the premiums.

This would happen regardless of the state of residence. This is very standard Mortgage language, where insurance is concerned.

[CreekDog]

29. I think they are trying to document carefully the value of the loans on their books where they can

because that's becoming a big deal, especially since there are so many loans whose value can't be documented as easily.

[Fresh_Start]

30. we provided full documentation

to get the best rate when we got the loan.
Over 50 pages of bank and brokerage statements: we were not a NINJA loan.

Doesn't seem like we're who they should be worried about.
If we didn't need the tax deductions, we could pay off the mortgage.

[CreekDog]

31. No, that's not my point, it's not about you...it's about documenting to their investors

the loans they are carrying.

if anything they want to show that they are carrying good loans and this is how they document a bulletproof loan.

[Fresh_Start]

33. thanks for getting it through my thick head

it was just unprecedented for me. I've owned homes for (gulp) 25 years now.
And I've gone through housing deflation in the early 90's in the northeast, just never had it happen before.

Hell, its making me squirrelly. I guess I'll look at earthquake insurance again. Not saying I'll buy it but I'll look again.

[OPERATIONMINDCRIME]

32. That's Completely Normal.

Mortgages are reviewed all the time to make sure they are in compliance, and it is nothing out of the ordinary to receive such a notice. Though it may have been years for you, not every property is reviewed each year. This just happened to be the time where your property and its current lack of coverage was identified.

Usually almost every big lender will require a minimum insurance amount of the mortgage amount.

[yellowdogintexas]

38. you put that together so much better than I did. Nicely said.

I guess servicing this type of issue for so long just made me wax interminably on it.

I never could explain something in 20 words or less anyway.

[TexasObserver]

42. Your mortgage deed of trust should have your obligations under the mortgage.

One such obligation is to maintain appropriate insurances. They may or may not have a right to demand that you get coverage that is not mandated in the original deed of trust.

I would ask them to specify the terms in the mortgage on which they base their demand, explaining that you have insurance that appears adequate. Ask them to explain themselves and their demands.

Do you think they want to get rid of your loan, for any reason? Is the rate really low? If it's a performing loan at a decent rate, that means they aren't doing this to try to get you to move your debt.

They're probably trying to increase their security protection and/or generate fees by getting insurance FOR you, if you don't get it. They do that sometimes.

[Fresh_Start]

44. our insurance has already sent them the fax to make them happy

its just that I've owned homes for 25 years always with a mortgage and its never happened before
yes, I'm in CA and its one of the deflating markets

I was really surprised by the request for HAIL coverage rider