Answers (6)
- Bryan Dunaway, "BryanDunaway"
- Contributions:31
Yes the banks are that rigid. Regardless of whether the house is worth less than what you currently owe. If you cancel your insurance they will purchase it for you and add the premium plus the extra charges for their trouble onto your existing loan amount. They will protect themselves as much as they can. Upside down with insurance is still a better investment for them than a damaged property without insurance. Bottom line: Your lender requires insurance to protect their investment and it will have insurance and if you force them to obtain it the cost will be higher than if you keep it.
- wayne lancaster, "funds2"
- Contributions:1874
As mentioned they will purchase insurance coverage and cost will be 2-3 times your current cost. It will be your liability and added to amount owed ab part of your monthly payment. If you default it will be added to total unpaid payments (including new higher ins. premium) plus attorney/legal fees. Big risk if you have an incident after you stop paying/cancel your insurance policy, and lender has not put new coverage in effect. Your personal property or any medical coverage would not be applicable if you are still in property. You could have legal responsibility, too if incident occurred whether you were living there or not.
If this action is in conjunction with pending default or not, I would advise you to seek legal counseling.
If this action is in conjunction with pending default or not, I would advise you to seek legal counseling.
- wetdawgs
- Contributions:39535
If they are aware you've canceled the insurance and refuse to purchase any, the most likely action is that they will buy the insurance and charge you for it.
- Neil Blumberg, "Neil.Blumberg"
- Contributions:72
To answer your question we must ask another: Does your lender, the mortgagor, have an insurable interest in your home? An insurable interest will exist when the insured person (the lender) derives a financial or other kind of benefit from the continuous existence of the insured object (your house). Because loss of or damage to your house would cause the lender to lose its secured way of recovering its loss if you should default or if the house were to burn down etc, it has a right to insure your house. Not only does it have that right, but it will do so and will charge you an exorbitant rate for that policy, much more than you're paying now!
But your question is phrased, interestingly, as what can the "mortgage service company" do if you cancel your insurance. Unless the mortgage service company and the lender are identical (where the loan was done for example "in house" and not sold to the secondary market), the servicer will not have an insurable interest and so cannot in its own name, insure your house. But it will nevertheless go ahead and do so in the name of the lender because the lender will have given it the right to do so. I've never seen a servicer/lender contract, but I imagine there's a specific clause there requiring the servicer to ensure that the house remains insured and that if your policy fails for any reason to immediately insure it.
One more thing: I'm betting dollars to doughnuts that not only will the cost of the new insurance taken out be much more costly, but its terms will be much less beneficial to you.
But your question is phrased, interestingly, as what can the "mortgage service company" do if you cancel your insurance. Unless the mortgage service company and the lender are identical (where the loan was done for example "in house" and not sold to the secondary market), the servicer will not have an insurable interest and so cannot in its own name, insure your house. But it will nevertheless go ahead and do so in the name of the lender because the lender will have given it the right to do so. I've never seen a servicer/lender contract, but I imagine there's a specific clause there requiring the servicer to ensure that the house remains insured and that if your policy fails for any reason to immediately insure it.
One more thing: I'm betting dollars to doughnuts that not only will the cost of the new insurance taken out be much more costly, but its terms will be much less beneficial to you.
- DanDaly
- Contributions:2
There is no investment. The house is way under water , but in no danger of a default . Are the banks so rigid as to give up on the P.& I. and foreclose ? Absent insurance they have a potential loss in foreclosure they have a fully realized loss.
- Ginny Don, "gindon5"
- Contributions:3
Why would you cancel your homeowners insurance. If you go back and read your mortgage paperwork it is required to protect their investment as well as yours. If there was a wind storm, fire, water damage, someone falls on your property and gets hurt and number of things including theft you are covered with insurance. If you let it lapse the mortgage company is notified immediately. They will take out insurance on your behalf and theirs and you will be charged no matter what the premium is. Isn't it better that you negotiate the rate then the bank who will not shop it? Make no mistake you will pay for it one way or another.
What can the bank (mortgage service company) do if I cancel my home owners insurance
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