Whether you re-finance your mortgage or the mortgage is sold off to a different lender, your Ohio homeowners insurance company needs to know as soon as it happens. Otherwise you’ll have problems.
Note: most people think your insurance company is AUTOMATICALLY notified when this happens. NOT TRUE. Often, we’re NOT told. So if you’re operating under the assumption that the new lender will tell your insurance company, forget it. YOU need to tell us.
Here’s the top 2 problems that can affect your homeowners insurance when your mortgage lender changes.
Problem #1- You’re currently set up for escrow payment and your bill is sent to the wrong lender for payment
This can happen a few different ways. You can voluntarily re-finance your mortgage with a different lender OR the existing lender sells the mortgage to another lender (this happens ALL the time!)
So when the insurance bill is sent to the wrong mortgage company for payment, several things can happen:
1) They can return the check to the insurance company
2) They can return the check to the insured (I’ve not seen this happen very often, but it IS possible)
3) They can ignore the bill (YIKES!)
Regardless of which reason it is, the clock is ticking on when the premium is due, so there’s a delay in it getting paid. Worst case scenario? The policy cancels for non-payment. And remember, this is your policy and you receive copies of all correspondence. This is worth a repeat: the homeowners policy is YOUR policy. Your mortgage lender is providing a service to you by paying it, BUT it is still your responsibility to make sure it gets paid. So if you get a cancel notice, this is a BIG clue that the lender hasn’t paid it and you need to follow up.
SOLUTION: Regardless of how or why your mortgage information changes, we need to know about it when it does. If you voluntarily re-finance, you’ll receive the new mortgagee clause with your loan paperwork. If you can’t find it easily, ask the loan officer. We need that information.
If your mortgage is sold, you will receive a notice from the new lender with the new mortgagee clause (and loan number if applicable). We need that information.
And final note- what if your new loan is not subject to an escrow account? It’s up to you to let us know, so we can remove escrow billing and change the pay plan so that you’re billed instead of the mortgage company. Again, any delay with getting the bill paid could ultimately end up in the non-pay cancellation files and that’s no good for anyone!
Problem #2- You have a homeowners insurance claim
If you have a mortgage on your house, claim checks are made payable to you as the insured AND the lender, as they have a financial interest in the home.
If the lender changes, and we don’t know, all claim checks will be issued to YOU and the lender shown on the policy. If it’s the wrong one, then this delays the claim process.
An endorsement (change) would need to be made updating the mortgagee and then the insurance company would have to void the check and issue a new one. Depending on how quickly this all occurs, it may take one to two more weeks to get a correct replacement check.
This delay could cause additional problems with getting repairs made. And if it’s a severe claim, usually there’s not a lot of time to waste.
What if you pay off the mortgage and have a claim? It would be a similar process. The check would be issued with your name and the mortgagee. A change removing the mortgagee would need to be submitted, then the claims department would void the issued check(s) and issue a new one with just your name. Again, this causes a delay with getting the repairs made and/or getting the vendors/contractors paid for their work.
So let us know when the lender changes or you pay off your mortgage so that information can be updated to prevent any future claims problems…..
The lesson here? If your mortgage lender changes, you need to let your insurance company know immediately. Whether you re-finance with a different lender or the mortgage is sold to a different one, the outcome is still the same- a new mortgagee. And if we don’t know, that could cause payment issues (even cancellation- yikes!) or claims issues (double yikes!).