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I live in California, I have applied to refinance my condo, which I have owned for 30 years. The new lender is requiring that in addition to the HOA (Homeowners' Association) insurance policy on the property that I purchase condo-owners insurance, which only insures my personal property within my unit.

I am fighting them on this as they should not have an interest in my personal property, Should they??

Is this legal? No other lender has ever asked me for this.

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    My condo building insurance would pay after a total loss disaster to rebuild to the drywall, but no fixtures including sinks and toilets, carpet or tile, cabinets, white-good appliances, etc. The mortgage company has an explicit risk-management interest that the amount of the loan is covered by insurance. Is the value of a bare unit less than or greater than the loan amount?
    – user662852
    Commented Mar 21, 2018 at 18:24
  • Not sure what you mean by "bare unit". If you mean unfinished without sinks, carpets, etc that you list above, then I would say the value is less than the loan amount because the unit would be unlivable. If you mean livable but empty, then the value far exceeds the loan amount.
    – Ellen M
    Commented Mar 21, 2018 at 18:38

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The condo's insurance policy may only cover "from the walls inward". As @user662852 points out in a comment, things like cabinets, appliances, and fixtures may need to be covered by your personal insurance. They may also want you to have liability coverage. For example, suppose you are filling your sink and walk away, "just for a moment", and your downstairs neighbor's unit suffers significant damage from the resulting flood. The condo association is going to hold you responsible, and may file a lien against your unit to enforce payment. Mortgage companies don't like to get in legal battles over priority, so they may want you to have liability coverage.

Requiring owner's insurance isn't universal, but it's pretty common in some states. You could try to find a lender that doesn't require it. Some HOA do require it.

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  • Thank you so much. I understand there is a slim chance that I would have to pay to have certain items replaced in case of fire, but couldn't understand why no other lender required that coverage.
    – Ellen M
    Commented Mar 21, 2018 at 19:05
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    Of course the way mortgage lenders make money is by figuring out all the "slim chances" that they won't get repaid, and compensating for them. Some may offer a lower interest rate, but require that you get insurance. Other's may simply charge a higher interest rate to make up for the bad debts. If you can get a significantly better rate, it may be cheaper to pay for the insurance. You'll have to work out the arithmetic from the various lenders.
    – Charles E. Grant
    Commented Mar 21, 2018 at 19:18
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    If no other lender asks you for this insurance, and you don't want this insurance, why do you not go with any of the other lenders?
    – Magua
    Commented Mar 21, 2018 at 20:18
  • That is what I intend to do.
    – Ellen M
    Commented Mar 22, 2018 at 18:49

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