From dealing with bank owned properties, I have heard of a number of sad stories from homeowners losing their homes. It is difficult to see someone work so hard to acquire the
American dream of home ownership only to see it being taken away.
There is the one story that I remember from a previous mortgagor that lost his home that dealt
with force-placed lender insurance. Basically, every mortgage lender requires its borrowers to maintain hazard insurance. For example, if there was a fire in your home, your lender would want to make sure that your insurance would pay off your existing home. If you do not continue to
carry your own hazard insurance, insurance would pay off your existing home. If you do not continue to carry your own Hazard insurance, your lender will obtain it for you at your expense, hence the word “force-placed’ lender insurance. The cost of this coverage will be considerably
more expensive than if you purchased it on the open market.
This is what happened to this gentleman that lost his home. He had a force-placed lender
insurance of $12,000 that was added to his existing mortgage, which increased his monthly mortgage payment by $400 and that was one of the reasons why he lost his home. If he had obtained the same insurance coverage on his own, it would have probably cost him only $1,500 to $2,000 for the year.
The important message is to make absolutely sure that you do not let your home (hazard)
insurance lapse. If you do not know when your insurance coverage will expire, please contact your lender directly.
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