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JT | What right does my insurance company have to Include my Mortgage Company on my claim check? |
We had a house fire and I'm looking for answers.
After all, my mortgage is secured from default by PMI. My Mortgage company did not take out the policy on my house, I did. My mortgage company does not own my policy, I do. So if anyone can explain why the Ins company has the right to include the MC on my claim check I would greatly appreciate it, thanks.
Additional Details
Thanks for all the answers! |
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jbowler
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Your mortgage company has a lien on your home. To protect the lien it expects the property to be repaired after a fire loss.
By including the mortgage company the insurance company is trying to guarantee that its money is properly used.
PMI is a guarantee you don't walk away from the house and mortgage and really has little to do with maintaining the value of the property. |
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SALMON
 |
If you have a mortgage, likely in the verbiage of the contract you agreed to having them named as a additional insured in respects to your Homeowners policy.
This is because they are the actual owners of the home which they are holding the note on as collateral against your loan/mortgage.
And hence to ensure that they get their money back from the remaining value of the loan since their collateral no longer exists in the form of the house. |
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RE Broker
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The mortgage company has every right to the check. They made a loan on the house and it burned, or was damaged. All you have to do is call the lender and they will sign it over to you. Not a big deal unless you were not going to repair, or rebuild. If it was a total loss, the lender will be involved in the rebuilding and signing of the checks to the contractor. The PMI only covers the top 25% of equity. If you had a 10% down loan, that means the PMI only covered the remaining 15%. Welcome to Real Estate |
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psycho-cook
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The fact is that your mortgage company has a lien against the house. It is the same thing with a car that has a lien against it until it's paid off. When you signed up for your mortgage you signed off that your responsibility to them would be paid off first. The PMI does not secure your mortgage it secures the cost to them if they have to foreclosure on you. |
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Aviator1013
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your ins. company has a lien against your home and so they have right to the payment of the loan. If you read over the terms and conditions that you signed on your mortgage you likely agreed to keep insurance on the home and in the event of a ins. claim, the lender gets paid. |
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kat k
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Sure, your home is OWNED by your mortgage company until it is paid in full. They are the ones that suffer the loss if the home is damaged. If you plan on staying in your home, the mortgage company will work with you to get your home repaired, and live-able again. The insurance company should issue you 2 checks one for contents and one for damage to your home. The check for damages to the home can be signed directly over to a contractor by you and your mortgage company.
The contents check is yours alone, and has nothing to do with your mortgage company...good luck! |
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mbrcatz
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Your mortgage is secured from default from failure to PAY it by PMI.
Your mortgage, when you took it out, had a CONDITION on it, that you would list them as mortgagee. The REASON they want to be listed, is that your mortgage was for a house in good shape - not a house that needs $50,000 (or whatever the damage from the fire was) in repairs. PMI takes in to account that the house is worth XYZ dollars - that way, if you default, the mortgage company forecloses & sells the house, and PMI makes up the difference - typically less than 5% of the house value.
PMI will NOT make up the difference for DAMAGES to the house - ie, they won't cover the fire damage. So if you choose to NOT repair the house, AND stop paying on the mortgage, now the bank has a HUGE liability - your house isn't worth ANYWHERE NEAR what the mortgage balance is, you have a big fat check in your hand, and NO incentive to repair it. What a rotten investment (from the bank's point of view).
SO, they put a condition on the mortgage - that you would add them as a "mortgagee" to the policy. If you DELETE them as mortgagee, then another condition of the mortgage is that they can put coverage in place, which only covers their interest (aka, fire coverage), and BILL you for it. If you don't pay it, they foreclose.
The insurance company doesn't have a RIGHT to include all mortgagees on the check for damage to the house - they have a DUTY to include all mortgagees. Don't want them to do it next time? Have them delete the mortgagee clause from your policy.
Then what happens: The bank puts forced placement coverage on your house, at your expense, which is about 10X what a homeowners policy costs, and you either pay it, or they foreclose.
It's all in your mortgage contract. You AGREED to it, before you borrowed the money. You can't change the terms of your mortgage contract now! But you CAN shop around for a new mortgage contract. Lots of luck finding a bank willing to give you a mortgage, without being named mortgagee (that's called, an unsecured loan). But you might get your parents to do it for you. |
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jim
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Ok if you have a lien on any type of property then the law states that the insurance company must include them on the check...that's because they have a financial interest...sorry but thats the way it is |
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zippythejessi
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Until you pay off the mortgage, they're a part owner of your home, and therefore have a stake in getting it repaired and replaced. If you don't, then they worry about not getting paid back for the loan.
It's the same thing if you have a car loan - they're part owners of the car until you pay it off. |
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