A group of activists recently posted email and materials showing that Bank of America falsifies customers' insurance information. The link is at the bottom of this post. Mortgages and insurance are two topics that put most people to sleep. But this is important to YOU and can affect whether YOU will be foreclosed upon for no reason. YOUR home can be taken even if you are in full compliance with your payments and mortgage agreement.
First, let me make mortgages exciting to you. In order to buy a home, most of us have to take out a loan.
The bank wants to ensure you will repay the loan, so you give the bank a mortgage. Essentially, you promise that if you do not comply with all the loan terms, the bank can foreclose on your home--meaning they go through a legal procedure to sell your home and use the money to satisfy what you owe.
Most of us know that not paying our monthly mortgage bill will result in our home being taken away. However, very few people understand that your mortgage and note also require you to do other things. Your home can be taken if you do not comply. For example, you cannot fail to pay me for rewiring your house. If you do, I will file a mechanic's lien and your mortgage company will likely start a foreclosure. Other common problems come from payment of taxes and insurance. Many of us believe these bills are guaranteed to be kept current because we pay the sums to the mortgage company each month as part of our payment. We foolishly trust the lender to handle our money as agreed.
If we fail to keep our home insured, the bank will buy "force-placed insurance." This is a policy that only insures the lender's interest in the home. If the home is destroyed, the lender gets paid. You get nothing for your home or possessions. The force-placed insurance comes from a crony of the mortgage company and costs many times what your homeowners' policy costs.
It makes sense for mortgage companies to be able to keep the home insured. No lender would want to make a loan secured by a pile of rubble.
However, abuses come in because of the profit the lender can make from buying force-placed insurance from a crony and from foreclosing on your home without cause.
Typically, the lender sees that your insurance has lapsed. The lender buys the force-placed insurance and demands you repay the sum. This may be a lump sum or a repayment made through increasing your monthly payment to replenish the escrow account that is used to pay for your insurance. If you cannot make the payment demanded, the lender can foreclose on your home.
Problems come in when the lender causes your insurance to lapse or falsely accuses you of not having insurance. In some cases, the lender takes your money into an escrow account and fails to pay your insurance company as agreed. This leads to a force-placed policy and can result in a huge payment for you, a profit for the lender and its crony insurance agency, and an excuse for the lender to foreclose on your home.
In other cases, the lender falsely accuses someone of not keeping their home insured. The same cycle as above ensures, except there is a homeowner desperately trying to show the lender they have complied and their home has always been insured. The lender can choose to ignore this, make profits off the force-placed crony insurance, and even foreclose.
A very early case I had as a lawyer was a young professional woman who was falsely accused by her lender of not keeping homeowners insurance. By the time she hired me, she was in foreclosure and the lender was in the final stages of getting a judgment to take her home. The homeowner had dozens of fax confirmation sheets where both she and her insurance agent had faxed letters, policies, and proof of insurance showing the policy had never lapsed. The lender chose to ignore every one of these faxes and all of the calls and certified letters directed to showing them the foreclosure was wrong.
When I entered the case, the foreclosure attorney would not speak to me. When I tried to approach him about the matter, he stated he had filed his "form foreclosure" that "worked every time." He refused to discuss any details. I scrambled to file pleadings showing that my client was not in default and should not lose her home.
Luckily, one day, the foreclosing attorney was busy and sent another lawyer to court. We spoke in the hallway.
"What is this case about?" he asked.
I showed him the complaint alleging my client's insurance policy lapsed and the many, many communications to the contrary sent to the lender.
"Why are we here?!" The lawyer exclaimed.
"That," I stated, "would be for you to tell me."
My client was very, very fortunate to find an attorney to represent her in court. She saved a lot of money in fees and a lot of trouble and worry by the good luck that a sane attorney covered court one day and was willing to review the facts of the case and see that his client was wrong.
However, my client should never have been placed in peril of losing her home. Although there are some legal remedies available for situations like this, none make up for the risk of losing one's home and the sleepless nights it entails.
This is why the Bank of America/Balboa Insurance scandal is important to YOU. The bank subcontracted with a dishonest insurance company to mislead consumers about the status of their insurance policy, to overcharge them on insurance policies, and to set consumers up for wrongful foreclosure.
The lesson from this is to protect yourself. Keep insurance policies up-to-date. If you pay through an escrow account with your lender, contact your insurance agent now and then to confirm the payments are being made, and carefully monitor any charges for force-placed insurance. If the lender accuses you of lapsing, fax proof (keep the confirmation sheet). Send a letter disputing the allegation and showing the proof of insurance to your lender via certified mail. Keep the return receipt. Consult with a lawyer early on to prepare for a wrongful foreclosure and to assert all your legal rights.
There is a war on to take our homes. Fight back. Document everything. Keep your documents. Call your lawyer. Trust no one.
