America is going through a foreclosure meltdown which will only get worse in the short run. Tens of millions of loans are in default, and the lenders either have foreclosed or are in the process of foreclosure.
However, there are some very real issues that you need to deal with during a foreclosure. Failure to address these issues could result not only in you losing your house, but being caught uninsured at the time of a disastrous loss, like a house fire.
Stated another way...what would you do if you had a major fire, wind or water loss during a foreclosure? Are you sure you’re covered?
First, let’s look at homeowners insurance and your loan escrow account.
If your homeowners insurance is being paid by your lender through an escrow account, that’s fine. However, if your loan is in foreclosure, you cannot be sure that the premium is being paid by that lender. If you have stopped making loan payments, you have also stopped adding money to your escrow account. Your homeowners insurance could have lapsed for non-payment.
So, the lender will “force place” a policy covering your home, but only for the loan balance, and charging it against your loan amount. But that policy will only cover the dwelling, no contents or liability coverage. The lender is only interested in protecting their loan.
But, sometimes, lenders make errors and premiums don’t get paid. So, your strategy to protect yourself is to make sure that the premium on your homeowners insurance is paid, even during a foreclosure.
But I recommend that you keep the policy in place just a little while after the foreclosure has been completed. Why?
Because we’re now learning that many foreclosures are being done without proper documentation by the lenders. Some highly placed politicians have noticed this, and are starting to make waves.
Rep. Marcy Kaptur (D- Ohio) is the senior woman in the House of Representatives, and the longest serving Democratic woman in House history. Her district includes Toledo, which these days is looking more and more like a ghost town.
Kaptur has recently been seen on CNN, promoting the “Produce The Note” initiative. In a recent interview, she stated that many mortgages have been sold and re-sold numerous times by lenders. She said that a lender who is foreclosing may not even possess the original loan document with the borrower’s signature on it. The biggest problem is that because more than one lender has owned your loan, more than one lender could foreclose on you for the same loan. It’s already happened many times.
There’s a great website called Consumer Warning Network that shows borrowers how to fight back.
Go to: Consumer Warning Network
Don’t just willingly accept that your lender did the foreclosure correctly. Investigate and fight back! Your financial future could be at stake!