Homeowners Insurance qestion

obieone

I've got a V.A. mortgage w/ Wells Fargo, and my homeowners insurance is w/ Allstate.
I've been getting notices about mortgage insurance from Wells, but seeing as I have a V.A. loan, that isn't required.
Well today, I got a notification that they(Wells) REQUIRE my insurance to cover the cost of the mortgage????:mad:
The mortgage is for the COST of the house + 3.5 acres of LAND!:mad:
Me thinks I'm getting stuck with someone elses DEFAULT!
WTF

heiney9

So is your question about mortgage insurance (PMI) or homeowners insurance? There's a big difference. Your Thread title states Homeowners and your post states Mortgage insurance.

H9

shack

I think they may be sending you stuff about different things. The VA insures the lender for amounts over the 80% Loan to Value that triggers the need for PMI (private mortgage insurance). PMI insures the lender for the amount of the debt over 80% if they have to forclose. They REALLY want that coverage now. But again with VA I don't think they can require it. Check with the VA to make sure.

What they are probably sending you is a standard form that says you have to have homeowners coverage equal to the amount of the loan. You are of course in a bit of a quandry as the insurance company will not insure for more than the value of the dwelling. You need to furnish Wells documentation that the land value is x amount and the dwelling amount is x amount and that you have insurance equal to the value of the dwelling. You may need to talk to an actual person who has a brain and can make an actual decision that is based on some sort of reason and not just "the rules". Start making some calls.

obieone

Thanks Shack. That what's I figured, but after them(Wells) OVER guesstimating my escrow acct. at the SAME time as the start of the housing implosion last year, I'm becoming a little paranoid.
I just keep thinking they're trying to stick me with someone elses default.
Especially, after the last couple of weeks.

mrmusicman

You are being stuck with somebody else's default...as is all of us tax payers.:mad:

obieone

Well, then somebody better make up their mind. I ain't taking no tag team on the this bailout ****!

Squidmon

Generally, you should always have full replacement insurance on your home.
In most cases, the insurance company will insure your dwelling for whatever the tax assessment value is. Therefore, the land is generally included in this.
For example, my tax data reads something like this
Dwelling-270,000
Land - 85,000
for total assessed value of 355,000.
When I look at my home owners policy, my dwelling replacement value is 355,000. Your policy 'should' be similar. It may vary from state to state, but probably not much.

My real estate license is in Wisconsin so I'm not sure about all other states. But a home deal will not close without home owners insurance that doesn't cover at least the assessed value.
So, the mortgage company is NOT sticking you with someone else's default, but rather making sure you have adequate coverage.

If you are talking about PMI, that's a different story altogether. That is simply, you must carry PMI if your loan amount is more than 80% of the value of the property. It's possible that you could buy a house with 20% down, then, a new assessment dramatically increases the value to the point to where you have <20% equity. Therefore the lender can now force you to purchase PMI. Doesn't happen often (especially right now, but is not unheard of).

Now this can go the other way too with PMI and most people don't check into it. Say you buy a home with <20% and must purchase PMI. After a few years, you pay down to a point where you have >20% equity. At this point you can contact the Mortgage Co and request that they drop the PMI. You must do it, believe me, they're not gonna call and tell you about it.

Now, for some strange reason. I haven't dealt with VA loans very much, so I may not know every rule with them. Hope this helps some.

shack

Squidmon wrote:

In most cases, the insurance company will insure your dwelling for whatever the tax assessment value is. Therefore, the land is generally included in this.
For example, my tax data reads something like this
Dwelling-270,000
Land - 85,000
for total assessed value of 355,000.
When I look at my home owners policy, my dwelling replacement value is 355,000. Your policy 'should' be similar. It may vary from state to state, but probably not much.

In most cases tax assesment has little correlation with real market value. Insurance companies rarely use the tax assement when underwriting homeowners insurance. They have their own formulation in determining market and/or replacement value and could care less what the tax information is (they are better at determining the value than the various govts). Insurance companies will not insure the value of land and will insure the value of the dwelling and improvements only. Let's say you have a lakefront lot valued at $500,000 with a 3,000 sq ft house with replacement cost of $200 per foot. Total value $1,100,000. Even if the insurance co will write a policy for the $1,100,000 (not likely) they will limit the amount they pay to the $600.000 in replacement value and it will state such in the policy. The majority of lenders understand that and will allow the insurance to equal the amount of the improvements.

cambir

shack is correct...ins companies each have their own system for calculating the replacement cost/value of homes...some better than others.

Insurance companies should not use tax assessments or market value to insure a home, because (as shack said) it has nothing to do with the cost to replace. Insurance companies also should not include the value of the land in the premium, because even if you have a total loss, the land will still be there and will not need to be replaced. If your policy includes it, I think you are being overcharged.

Some mortgage brokers do request/"require" home insurance for the amount of the loan. They shouldn't, but they are usually not licensed in insurance either. Each insurance company probably has their own way of getting around this to help the customer retain/acquire their loan.

obieone, I don't know what state you are in and I know nothing about VA loans, so I can't really speak to your exact situation. However, I do work for Allstate and strongly suggest you contact your agent as I have heard there are ways around this (I'll see if I can research a little for you too).

Squidmon

I'm NOT an insurance guy by any stretch. But I own/have owned 6 homes, and at least here, and in all 6 instances that has been the case. Also, at about $400-600 a year for total replacement, I really dont think I'm being overcharged. Don't have anything else to go by. I buy and sell em, don't figure out the insurance. I recently switched my insurance from one national chain to another on the 3 I still own and it's the same, the dwelling replacement is the same as the tax assessment. I have no idea of what formula they're using.

You are right though. In recent years, tax assessment has been a poor measure of 'market value' in many, many markets. But at least HERE, in my market, that is now the price point as the grossly over-inflated prices have settled back down to earth. In 2005, most homes were selling for anywhere between 50-150K above assessed. Today, it's 10k plus or minus. Just going on the data that I have though. I'm sure it varies widely from location to location