More On Mortgages

I talked to my friend Steven and he talked to an attorney about what folks could do in Florida if they were behind on their mortgage and had an insurance claim. The answer: not much. If the mortgage documents allow the mortgage company to use insurance funds to either catch up on the past due payments or to apply those funds to the unpaid balance of the mortgage, then apparently the State of Florida will support whatever the mortgage company wants to do in that regard. Steven is up in arms and you should be too. 

This raises another question; can the mortgage company use these funds to pay down the principal if the loan is in good standing? I don’t know, but I would be interested in finding out.

In the meantime, Steven’s question deserves an answer: what’s the point of paying insurance if you’re behind on your payments and won’t be able to use the insurance money to affect repairs?

Stevens’s conversation with the attorney did raise an interesting point that you’ll want to keep in mind if you’re in this situation and may be an answer to the question. In a word: contents. The mortgage company does not have the right to insurance proceeds for contents or additional living expense and with one big proviso. The proviso is provided the insurance company does not commingle dwelling, contents and ALE funds into a single check. If they do the mortgage company will presume all the funds go to the dwelling. So if you have a claim and are in this situation, insist the insurance company break out these payments into separate checks. It will save you lots more heartache down the road.

Also, in case your thinking like I was, why not stop paying the homeowner's premium, let the bank put forced place coverage on your house and buy a contents policy on your personal property, that would do the trick and maybe save some moola. Right? Wrong. I spoke with a insurance agent friend of mine. It turns out that you can't buy a contents only policy to cover property in a house you own and occupy.

Bill