The most recent bank that bought my mortgage, I guess about a year ago, just sent me a letter demanding I change insurance companies to one that offers superior coverage. Are they allowed to demand this? I thought I only negotiated conditions with the bank I originated the loan with, and everybody else bought the mortgage on an as-is basis from the one before them.
I’m inclined to agree they can’t change the terms you had with original lender. However, look at the original deal, you may find that the bank has had the right to makenyoubdo this all along and is just exercising the right now for the first time. (even so, I don’t think they can tell you which insurance company you have to use, only how much coverage)
Superior coverage in what respect? Does your current policy not cover the value of your home? My mortgage, which is not entirely traditional nor has it ever been sold, only says I have to maintain adequate hazard insurance to protect the loan collateral.
The new mortgage owner cannot change the terms of the mortgage. That does not mean that they cannot require that you change companies, consistent with the terms of the original mortgage. You need to read the original mortgage carefully, and compare what the new company is requiring to see if it is consistent.
For example, it may be the case that your insurance company is no longer considered safe enough a bet. Or, it may be that the new company has a different viewpoint upon the ability of your current insurance company’s policies to meet the requirements of the mortgage.