Will the Bank pay the Home Owner's Insurance if the home owner stops making payments?

Answer 1

If the property is going in to foreclosure, usually the homeowner has stopped making payments on the loan as well as insurance and proeprty taxes. The bank is going to protect its asset and secure the property with a "lender's policy". If you read your mortgage documents, there will be a clause that the property is to be insured at all times. Also, the lender will more than likely pay deliquent property taxes, again to prtect its asset. All payments made by the bank on your behalf will be added to the loan balance.

Answer 2

Good question.

It would depend on whether their is enough money in the escrow account to pay the premium when the insurance company sends the bill to the bank.

Answer 3

Nathan - I can only comment on California as it relates to foreclosures. If the transaction is a short sale, then the bank agrees to take a certain amount. Once in agreement, they'll issue a SSA (Short Sale Approval) letter. Once the transaction is completed, the seller (owner) is off-the-hook for any remaining balance. A new law in California prohibits a lender from going after the owner for any additional monies inclusing payments the bank has made for insurance or property tax. A foreclosure is a bit different from bank to bank.

Answer 4

It is clear in the Mortgage or Deed of Trust that preservation of the collateral is a priority and maintaing insurance ont the property is required by the Mortgagor and absent timely payments, the lender has the right to "forceplace" insurance on the property. So, the lender may, during delinquency, advance payments toward escrow items such as Homeowner's insurance even if there is a shortgage in the escrow account. But, once the home goes to default, it is more likely that the lender will allow the existing policy to lapse and put forceplace insurance on the property to limit its exposure to claims other than specific hazards.

Answer 5

Good answer. I've seen people who haven't paid their mortgage for over a year, get a new roof, paid for by the banks insurance.

Wow, the poor Bank... :-(

Answer 6

Yes and you more than likely will also lose that condo/townhome to foreclosure, whether being a mortgage foreclosure or foreclosure via a tax or hoa lien.

Answer 7

Most lenders will "force place" insurance on the property to protect their investment.