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!
Tuesday, February 3, 2009
Insurance Regulation: Florida Braces As State Farm Waves Goodbye
This week, State Farm Insurance Company, the largest private property insurer in the state, announced that they are pulling out of Florida after sustaining huge losses and being denied rate increases.
I am no fan of the games and scams of the insurance industry. Even though insurance makes our modern lives and way of life possible, it is fraught with problems. Insurance companies regularly mistreat their own customers. They delay, deny and minimize claims as standard operating procedure. But they also pay a lot of claims, too, and deserve to make a profit.
Into this environment come the insurance regulators of the 50 states. They try to protect the consumer. Their regulations swing from too much to too little, just like a pendulum. But, right now in Florida, the insurance regulators’ pendulum has swung to over-regulation. The regulators and state legislators have bungled the insurance marketplace in Florida, and consumers are going to get burned.
The Florida Department of Insurance has not produced evidence that the insurance market has failed, which might explain stiff price regulation in lieu of simply allowing competition in the marketplace to regulate premiums.
During the last 15-year period, Florida insurers have been unprofitable as a group. Dozens of insurers have stopped operating in the state. Simply denying rate increases does not benefit consumers. As insurers stop writing policies in Florida, reducing competition makes consumers worse off, with higher premiums and limited choices.
In response to insurance company exits since Hurricane Andrew, Florida legislators created Citizens Property Insurance Corporation (CPIC), an unprofitable state-run insurer that sells its policies below cost. This ridiculous pricing, paired with insurer exits, makes CPIC the insurer of over half of Florida's homeowners. Because CPIC is losing money, and owned by the state, these losses will eventually require taxpayers and consumers to bail out yet another insolvent corporation.
With State Farm’s departure from Florida, CPIC may end up insuring 80% of the homes in the state. CPIC is nearly insolvent right now. All it will take is one more major catastrophic hurricane to finish it off. However, it will be the Florida consumers and taxpayers that will be finished off when they are forced by the state legislature to bail out the state-run insurer.
The over-regulation of insurance companies was also recently shown in New Jersey. Just like in Florida, New Jersey lawmakers and regulators had over-regulated the car insurance marketplace to the point that insurance companies left the state in droves. New Jersey drivers found it nearly impossible to buy car insurance at any price. In 2003, the lawmakers and regulators regained their sanity and enacted reforms that brought back competitive pricing to car insurance. Rates are dropping and citizens can once again find affordable car insurance in New Jersey.
State regulators sometimes do more harm than good. Sometimes they get it right.
I am no fan of the games and scams of the insurance industry. Even though insurance makes our modern lives and way of life possible, it is fraught with problems. Insurance companies regularly mistreat their own customers. They delay, deny and minimize claims as standard operating procedure. But they also pay a lot of claims, too, and deserve to make a profit.
Into this environment come the insurance regulators of the 50 states. They try to protect the consumer. Their regulations swing from too much to too little, just like a pendulum. But, right now in Florida, the insurance regulators’ pendulum has swung to over-regulation. The regulators and state legislators have bungled the insurance marketplace in Florida, and consumers are going to get burned.
The Florida Department of Insurance has not produced evidence that the insurance market has failed, which might explain stiff price regulation in lieu of simply allowing competition in the marketplace to regulate premiums.
During the last 15-year period, Florida insurers have been unprofitable as a group. Dozens of insurers have stopped operating in the state. Simply denying rate increases does not benefit consumers. As insurers stop writing policies in Florida, reducing competition makes consumers worse off, with higher premiums and limited choices.
In response to insurance company exits since Hurricane Andrew, Florida legislators created Citizens Property Insurance Corporation (CPIC), an unprofitable state-run insurer that sells its policies below cost. This ridiculous pricing, paired with insurer exits, makes CPIC the insurer of over half of Florida's homeowners. Because CPIC is losing money, and owned by the state, these losses will eventually require taxpayers and consumers to bail out yet another insolvent corporation.
With State Farm’s departure from Florida, CPIC may end up insuring 80% of the homes in the state. CPIC is nearly insolvent right now. All it will take is one more major catastrophic hurricane to finish it off. However, it will be the Florida consumers and taxpayers that will be finished off when they are forced by the state legislature to bail out the state-run insurer.
The over-regulation of insurance companies was also recently shown in New Jersey. Just like in Florida, New Jersey lawmakers and regulators had over-regulated the car insurance marketplace to the point that insurance companies left the state in droves. New Jersey drivers found it nearly impossible to buy car insurance at any price. In 2003, the lawmakers and regulators regained their sanity and enacted reforms that brought back competitive pricing to car insurance. Rates are dropping and citizens can once again find affordable car insurance in New Jersey.
State regulators sometimes do more harm than good. Sometimes they get it right.
Friday, January 9, 2009
Hailstorms: Matching Roofing and Siding Strategies
Hailstorms can happen anywhere that thunderstorms occur. Thunderstorms have the potential to produce hail the size of a BB or the size of a grapefruit. Severe hailstorms can cause more damage than tornadoes, simply because the area of a hailstorm can be much greater than that of a tornado. Hail can damage everything it strikes, whereas a tornado can flatten one dwelling while the house next door doesn’t lose a shingle.
We are just around the corner from Spring, when hailstorms begin to pop up with regularity. You can be ready by following the strategy in this article.
Nearly every time there is a big hailstorm that causes widespread damage to cars, homes and businesses, the issue of “matching” rears its ugly head. But there is a way that you can solve the “matching” disputes between you and your insurance company and get paid all you are entitled to collect.
Typically, when a hailstorm occurs, it strikes property at an angle. So, while one side of your roof might get pounded, the opposite side may have no damage at all. The hailstones might hit one slope of the roof really hard, while just skipping across the other slope. The same is true with exterior siding.
So, your insurance company adjuster may inspect your damage, and replace the damaged roofing or siding. But, that might cause an additional problem:
What if the new roofing or siding doesn’t match the old roofing or siding? Many times this occurs when the old material has been discontinued by the manufacturer. The new material might be of a different color or different dimension than the old material. For example, you might have 4” lap vinyl siding, but the manufacturer now produces 4” lap siding with a slightly different color or texture. It does not match.
You, the policyholder, now have an additional loss, which is the value of your home. If the siding or roofing doesn’t match, it diminishes the value of the home. But this part of the loss is indirect damage. The policy states that it only pays for direct damage to property. Many times, adjusters and insurers will rely on a strict interpretation of the policy wording, and state that they do not owe you any additional funds simply because of a matching problem.
However, there is a clause in the Homeowners policy that deals with indirect damage, and can be brought into a “matching” dispute to solve the problem
That clause is found in the Section I – Conditions – D. Loss to a Pair or Set. It says:
In case of loss to a pair or set we may elect to:
1. Repair or replace any part to restore the pair or set to its value before the loss; or
2. Pay the difference between actual cash value of the property before and after the loss.
Not only does this clause cover the direct loss of an item that is a part of a pair or set, but also covers the indirect loss sustained because of the diminished value of the remaining item(s) of the pair or set.
Your adjuster might disagree with this interpretation. He may tell you that this clause only pertains to personal property, such as when a person has one crystal candlestick stolen from a pair, or two plates from a rare set of 12 get broken.
But look carefully in your policy. NOWHERE in the policy does it say that the clause only applies to personal property.
For example, let’s use hail damage to siding. Two sides of the house sustain damage to 12” white aluminum siding with a textured finish. The manufacturer ceased making this siding and now only makes 8” aluminum siding without texture. It clearly does not match. The adjuster wrote an estimate to replace only the damaged siding for $10,000. But replacing all four sides of siding would cost $20,000. We are assuming a replacement cost policy, no depreciation applied.
The insured gets an appraisal of his dwelling, and finds that the dwelling’s pre-loss value was $100,000. After the storm, the dwelling appraises at $95,000. So you can see here that the “set” value of the undamaged siding decreased the home value by $5,000.
To be equitable to the insured, the insurance company should pay the $20,000 to replace all four sides of the home. That settlement process might take a little longer if you have to get an appraisal to prove the diminished value, but you’ll be properly compensated for your loss.
Finally, you the policyholder have legal precedent on your side. On October 12, 2000 in a Minnesota District Court, a judge ruled against American Family Mutual Insurance Company and ordered it to pay claims where there were matching disputes after a hailstorm. (see Min. Stat. {72A.201, Subd. 5(8) (1998)}).
We are just around the corner from Spring, when hailstorms begin to pop up with regularity. You can be ready by following the strategy in this article.
Nearly every time there is a big hailstorm that causes widespread damage to cars, homes and businesses, the issue of “matching” rears its ugly head. But there is a way that you can solve the “matching” disputes between you and your insurance company and get paid all you are entitled to collect.
Typically, when a hailstorm occurs, it strikes property at an angle. So, while one side of your roof might get pounded, the opposite side may have no damage at all. The hailstones might hit one slope of the roof really hard, while just skipping across the other slope. The same is true with exterior siding.
So, your insurance company adjuster may inspect your damage, and replace the damaged roofing or siding. But, that might cause an additional problem:
What if the new roofing or siding doesn’t match the old roofing or siding? Many times this occurs when the old material has been discontinued by the manufacturer. The new material might be of a different color or different dimension than the old material. For example, you might have 4” lap vinyl siding, but the manufacturer now produces 4” lap siding with a slightly different color or texture. It does not match.
You, the policyholder, now have an additional loss, which is the value of your home. If the siding or roofing doesn’t match, it diminishes the value of the home. But this part of the loss is indirect damage. The policy states that it only pays for direct damage to property. Many times, adjusters and insurers will rely on a strict interpretation of the policy wording, and state that they do not owe you any additional funds simply because of a matching problem.
However, there is a clause in the Homeowners policy that deals with indirect damage, and can be brought into a “matching” dispute to solve the problem
That clause is found in the Section I – Conditions – D. Loss to a Pair or Set. It says:
In case of loss to a pair or set we may elect to:
1. Repair or replace any part to restore the pair or set to its value before the loss; or
2. Pay the difference between actual cash value of the property before and after the loss.
Not only does this clause cover the direct loss of an item that is a part of a pair or set, but also covers the indirect loss sustained because of the diminished value of the remaining item(s) of the pair or set.
Your adjuster might disagree with this interpretation. He may tell you that this clause only pertains to personal property, such as when a person has one crystal candlestick stolen from a pair, or two plates from a rare set of 12 get broken.
But look carefully in your policy. NOWHERE in the policy does it say that the clause only applies to personal property.
For example, let’s use hail damage to siding. Two sides of the house sustain damage to 12” white aluminum siding with a textured finish. The manufacturer ceased making this siding and now only makes 8” aluminum siding without texture. It clearly does not match. The adjuster wrote an estimate to replace only the damaged siding for $10,000. But replacing all four sides of siding would cost $20,000. We are assuming a replacement cost policy, no depreciation applied.
The insured gets an appraisal of his dwelling, and finds that the dwelling’s pre-loss value was $100,000. After the storm, the dwelling appraises at $95,000. So you can see here that the “set” value of the undamaged siding decreased the home value by $5,000.
To be equitable to the insured, the insurance company should pay the $20,000 to replace all four sides of the home. That settlement process might take a little longer if you have to get an appraisal to prove the diminished value, but you’ll be properly compensated for your loss.
Finally, you the policyholder have legal precedent on your side. On October 12, 2000 in a Minnesota District Court, a judge ruled against American Family Mutual Insurance Company and ordered it to pay claims where there were matching disputes after a hailstorm. (see Min. Stat. {72A.201, Subd. 5(8) (1998)}).
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