Who is responsible for the yearly incorrect payment of my homeowners insurance?

Question

The company that originated my home mortgage (in 2016) transferred the loan servicing to another company very shortly after we bought our house. The new servicer has been an incredible pain to deal with.

My property taxes are due yearly in September and December (approximately half in each), and my homeowners insurance is due in November. As is common in mortgages, the taxes and insurance are paid from an escrow account held by the loan servicer.

Every year, the servicer has gotten my insurance payment wrong and I have had to call them and nag them to get it corrected. (They used to get the tax payments wrong too, but this September they finally got the taxes right and I am cautiously hopeful that they will continue to do so.) The insurance payment, like the tax payment, is based on a percentage value of the property, so it changes every year. The insurance company (both their customer service and my independent agent) have assured me that they send a bill to the loan servicer (to the address the loan servicer says to use for their insurance department) at the same time that they send the yearly renewal papers to me, which is 60 days or more before the payment is due.

Some years I have gotten letters from the insurance company threatening to cancel coverage for nonpayment (or incomplete payment), followed by letters from the loan company that they were informed my insurance is being cancelled and they will start charging me for their own insurance carrier.

I'm tired of dealing with this mess every year, and the customer "service" people at the loan company are absolutely useless - they just keep claiming that they have no idea what is going on and have no record of this year's insurance bill so they just paid the same as last year.

Which company - the insurance, or the loan servicer - should I keep bugging until this is resolved? Or is there some other avenue I should take?

Answer 1

I have been in your situation. The tax office said they sent the bill to the loan servicing company, the loan servicing company said they never got the bill, they also did nothing to solve the problem. I discovered it a few months after the bill should have been paid when the yearly accounting and adjustment of the escrow account occurred, and there was a large balance in the account. After a few months of trying to get the loan servicing company to care, I paid the bill and then fought the company for my money back. I also demanded they pay the late fee and interest.

I then asked for the procedure to opt out of the escrow requirement. I met all the criteria except getting permission for the owner of the mortgage. When I demanded that the owner be told they failed to notice the problem, and they dragged their feet in paying the tax bill; magically I was approved. Now for 20 plus years I have never had to use an escrow account for any of my mortgages.

The problem you face is that two corporations are claiming that the other didn't do their part. Unless you can find an obvious mistake in the address the insurance company has in their system the risk will always be there that the loan servicing company will make another mistake. The fact that they have also had problems paying the tax bill would make me very nervous.

I would contact the servicing company, and start the procedure for dropping the escrow requirement. You would then have the responsibility for paying taxes and insurance from your own funds. It isn't hard to setup a small savings account at your bank to hold the funds. I move the money into the account I setup every paycheck and pay three bills from it a year. Sometimes the loan company wants proof I paid the insurance bill, but they only ask every 4 or 5 years.

note: The biggest requirement for dropping the escrow requirement may be an equity requirement. Mine had a requirement of 20% or more equity.

Answer 2

Very similar experience.
I think you will not be able to change this company; the are either sloppy or intentionally do it this way (to force you into their own insurance). Once you accept that they won't change, no matter what you do, you have only two options:

• refinance to another company. It might not be a deal financially, but it gets you rid of the nuisance, risk, and extra work
• live with it, and fight the fight every year.

How much one-time cost is your annual time, effort, and annoyance worth? That makes the decision.

If you refinance, check the new company online first.
I found that the issues with the company my loan was sold to was well known and many had them. You cannot pick where the bank sells the loan to, but if you pick a dedicated mortgage-giving company, the chance that they sell it is much lower.
Consumer banks (with brick-and-mortar stores) are the typical mortgage sellers - they get your mortgage business because they have an existing relationship with you, and then immediately sell it to the highest bidder (which is the company you ended with, bidding highest because they cut corners in handling your mortgage).

Personally, I have made good experience with online-only banks for my mortgage. YMMV.