Reply by ms/IL on 3/2/06 8:57am
Msg #101318
Re: Mortgage Companies have Insurance Changed Prior to Closi
I did an out of state purchase for a Florida property last week and this issue came up. The borrower was VERY upset and because it was almost the final doc to be signed and it was after 9:30 pm, of course, we could not reach his loan officer or title company for explanation. He did sign this new insurance document, and called me the following day to say that they gave him the runaround about condo flood insurance issues. I also agree w/Charm that it could be some kind of "kickback".
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Reply by ReneeK_MI on 3/3/06 5:17am
Msg #101572
Changing Ins AGENTS, or changing mtgee clause?
If you mean the lender is switching the borrower's h/o insurance policy from one company to another, I'm baffled how that could be done w/o the borrower's own request and payment.
If you mean the lender is changing the Mortgagee Clause, that is pretty standard. These clauses are very sensitive; precise verbiage must be used and it must be in effect AT the moment of transaction, for the lender to be covered, and there must be evidence that the policy is paid/in effect. It's an area of 'high risk' of fraud - misrepresentation of policy, sufficient coverage, payment of policy, ect. - and for that reason, lenders take steps to ensure the information is valid.
At some point between underwriter's 'conditioned' approval and closing, the lender will obtain h/o info (whom, how much, paid-to-date, etc.) They will then contact the ins agent, provide the correct mtgee clause and ask for a "dec page" showing new clause, effective dates, amounts, etc. and paid-to-date receipt. They obtain direct from agent, OR call & confirm info., and ensure all the little duckies are in a neat row.
I suspect sometimes borrower's are more familiar with their h/o ins AGENT, and often don't recognize the actual insurance provider (underwriter). They talk to agent of Something Ins Agency, write checks to Something Ins Agency, and don't recall or even notice that policy is Something Else Insurance Company. They might even think their policy has been placed with a totally different company.
The letters in the pkgs that they are seeing are like confirmation letters to the h/o ins company that the loan is closed/in effect. The h/o AGENT has already prepared the mtgee clause change, but they rarely put the changes into EFFECT until some notice of actually having closed; however - if and when push ever came to shove, the lender HAS a dec page showing all the info needed, obtained direct or confirmed.
I once had (on lender side) a purchase close on a Friday, with a 'frauded' paid receipt I obtained DIRECTLY from ins agent (I say frauded because it SAID paid-in-full, but as is common in h/o ins industry, the receipt was provided as courtesy at buyer's request of agent to do, saying "I'll come in Mon and pay you." This is done ALL THE TIME!). Saturday - that house burned to the ground. You can bet lender's losses were covered! It must be that they so rarely suffer these kind of losses, they have no problems giving out phoney paid receipts.
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