My wife (of nearly two months) inherited a house from a childhood friend, and moved into it with her sister in 2016. Her sister, using an employee discount from her employer, paid the homeowner’s insurance until some time in 2021. In 2020, the sister was injured on the job, and spent several months in a disabled-but-still-employed status, and eventually was moved off the company’s payroll. This triggered the loss of the discount on the insurance policy, and the policy was cancelled by the carrier. My sister-in-law reports that she bought six months worth of a new policy with a different carrier when the first policy was cancelled. She couldn’t recall if she bought it through State Farm or Farmers (more on that later), and policy paperwork was never successfully transmitted to my wife.
In 2017, my wife entered into an HECM (reverse mortgage, in the common parlance). Her obligations, under the terms of the HECM were to keep property tax payments current and homeowner’s insurance in force. Failure to meet those obligations would cause the loan to be called, and all moneys advanced under the term of the mortgage to be due and payable.
One of the things about having a reverse mortgage is that it seems that EVERY lender who underwrites them is always jockeying to take them from whomever currently holds the note. So my wife has, for several years been getting solicitations to refinance her HECM, with (implied) promises of lower interest rates, and higher withdrawal limits. My wife has responded to one of these solicitations, and is currently approaching the final stages of a refinancing contract.
Today, she was asked to provide the new lender with information about her homeowner’s insurance policy. Well, no problem, right? Sis has been keeping that taken care of, right?
Apparently NOT right. When asked, Sis responded that she bought a six-month policy from an agricultural carrier of some type, but she did that more than six months ago. So, there IS no policy.
I called Farmers customer service to see if they could find the policy, and maybe reinstate it, if the lapsed premiums were covered. The CSR wasn’t able to find that any such policy existed, but gave us a number to call tomorrow morning. Not much help.
That was when I found out that she wasn’t sure if it was Farmers or State Farm. So I called State Farm customer service to see what I could see. They found my wife’s name and address in association with a quote request, but no record that a policy had been written or sold. They then transferred me to an agent (not named Jake, more’s the pity), who took our information, asked a few questions, and wrote us a policy, which I quickly bought.
On a semi-related note, last year, the current lender, sent my wife a notice saying that her property tax bill had not been paid (it had), and that she needed to correct the deficiency in order to avoid defaulting on the reverse mortgage (we satisfied their demand for documentation by the required date). I presumed that the lender’s compliance monitoring folks had queried the county tax collector’s office for the status of the tax payment. And I would kind of expect that the monitors would also remain in contact with the insurance carrier, and similarly light a fire under our asses if a homeowner’s insurance policy had lapsed or been cancelled. We have had our asses unwarmed for the past year of possibly not carrying a valid policy.
How much shit are we in? Is the lender within its rights to call the loan due to our inability to document continuous coverage, or is the policy that went into effect tonight enough to shield us from such an action?
Thanks in advance for any knowledgeable responses.