Speaker 1 (00:00)
What's going on everyone? am David Green, host of The David Green Show, and I am here with Christian Bachelder, broker and owner of The One Brokerage. Today we are going to be talking about Christian, take it away.
Speaker 2 (00:13)
What happens if you watch the previous episode, foreshadowed this, what happens if your lender doesn't pay your insurance? Which is, we'll go down this whole crazy spiral of a client, not a client of ours, but a person in this news article that this happened to. So it's not some crazy, unhappened event. It happened to, sounds like this Houston couple who was uninsured during Hurricane Barrel. So we'll discuss what happens when that
Speaker 1 (00:41)
Okay, so break it down for us, Christian. Let's start off by just describing what is homeowners insurance and why is it normally collected by the lender?
Speaker 2 (00:51)
Yeah, so the lender obviously cares about you paying them back. That's called your principal and interest. For those of you familiar, PITI stands for what your monthly payment is. The first P and I are easy. That's what you owe the lender for the repayment of the loan. The second I is insurance. That's your homeowner's insurance. That's what pays to protect the property. That's what comes from, you your GEICO, your Allstate, your State Farm, your Farmers, whatever you choose to use for your insurance company. And then the T, obviously the final letter, I guess is the second to last, but.
I did a matter of order, but the T is your property taxes. That's what you owe the state or county or whatever governing entity that is managing the property. Now, the one that we're going to focus in on is your homeowners insurance. Because on our previous episode, we discussed what happens if the house is destroyed in a hurricane, in a flood, in a fire, in a tornado, whatever happens. And typically, your insurance policy will cover you for the losses. They will help you rebuild the house.
They will cover you for any loss of rents that you have on a rental property or your living expenses during your displacement from that house. Now what happens if unfortunately like what happened to this Houston couple in this, think this is an ABC 13 article here.
When you're lender, you pay your PITI every month to your lender. That means you're paying monthly installments of your insurance and your taxes and your lender is holding that for you. And during the end of your billing cycle, they go and they collect 12 months of insurance and they pay your homeowners policy. They collect 12 months of taxes, maybe six months if you're billed every six months, but the full year and they pay your property taxes for you. The lender has an incentive to do that. The lender wants to make sure the house is properly insured.
and obviously that the property taxes are paid. Those are the only things that can impact the lender's investment into your house. Now this lender sounds like they have quite a lawsuit coming their way. From the sound of it on this article, this lender did not pay the home insurance and this house was a loss during Hurricane Barrel. What that means is that the lender was collecting every month, they were collecting the payments
from the borrower and for whatever reason, maybe somebody quit, maybe somebody messed up, maybe somebody goofed, who knows? The insurance was not paid. And the renewal notices was most likely sent to the lender and said, hey, you owe us money, you owe us money, you owe us money. And the lender did not repay it. The lender made a mistake. And that led to, during the time of this loss during the hurricane, the house not having coverage, which is the worst case scenario.
for a borrower that is doing the right thing and paying their mortgage every month and yet still does not have the coverage they were led to believe they were paying.
Speaker 1 (03:41)
Now in this case, the lender is saying that they mailed documents to the person's house, but that the address may have been incorrect. That can happen a lot of the time when you sign up for insurance, you lived in one place, then you move somewhere else. It doesn't get updated. So the lender and the banks are always going to do everything that they can to say this is not on us. You have to pay for it. and I'm guessing it's going to come down to the fact that they're going to say it was the homeowners responsibility to make sure they had insurance, even though
the lender was supposed to be paying it. So what advice do you have for real estate investors who might have an impound account set up with the lender and assume that it's being paid because they're being charged for it?
Speaker 2 (04:20)
Yeah, this is a tricky one because there shouldn't need to be a need for advice for me to give here. If the lender's collecting it, they should pay it. Now what most lenders do, I've had this happen to me personally. I own a property in Florida. I gave the lender and this was me. I originated the loan. got the loan, but that loan got sold after I closed it. Okay. So the company that I was originally paying payments to was not the company that now owns the mortgage. They're supposed to transfer. And now I paid the new company supposed to be super easy.
that new company did not get a copy of my original insurance policy. So when that policy expired, the lender said, hey, we haven't received a new policy, we're gonna buy one for you. And if you guys know anything about what's called force-placed insurance, that's where the lender forces an insurance company, they almost always choose the most expensive option. They choose a really like way, way, way higher policy than what you need because now they have a stake in the matter, right?
Now, what I do is I see my monthly payment surge by $1,500, something crazy, right? And they say, you owe us this amount because we had to buy a new policy and now you're paying us based on this new insurance. I went and showed them that I renewed my original policy and got it replaced. That sounds like a lot. If you're paying your monthly insurance, my advice to you was be set a note on your calendar.
when your property taxes are due, whether it's every six months or every year, and set a note on your calendar when your insurance is due. And just give them a call. Hey, Allstate, did you get my premium this year? Are we good? Yep, you're renewed through 2025. Beautiful, cool, thank you, bye. Same thing with the city taxes. Hey, city of Los Angeles, did you get my property taxes this year? Yep, you're all paid up. Cool, okay, click buy. Just doing that simple act can save you.
A very unfortunate scenario like this Houston couple where if something just wasn't unpaid and the lender puts it back on them saying, we sent you mail. How easy is it to avoid those of you who get mail? Like I do some of our listeners who may have five, 10, 15, 20, 30 homes. David, I know if somebody tried to get you by mail, it ain't happening. Yeah. Right. Me neither. It's, it's, it's tough. Especially when you get just piles and piles and piles, like many investors do, give them a call.
the
for that 0.01 % of the time, call the check to make sure you don't find yourself in that position. That's the best advice I can give.
Speaker 1 (07:17)
Great advice. If people want to call and check on you, they want to tell you that you look handsome today. They want to ask a question about financing or they want to get a loan. What's the best way to get a hold of you?
Speaker 2 (07:28)
Absolutely, guys, at the onebrokers.com is just our company website. That's where you can find out more information about us and at the one broker on Instagram is the best way to get me if you're trying to get in touch with me directly.
Speaker 1 (07:41)
All right, you can find me at David Green 24 on Instagram. Give me a follow over there. Or you can find me at davidgreen24.com or real talk real estate.com. We can learn more about the show. Thanks everybody for listening. We hope this was eye opening for you and we hope we save somebody from falling into the trouble that this Houston couple unfortunately found themselves in. We're the one brokerage. We'd love to finance your real estate. So give us a shot and see why we're one of the top brokers in the nation. I'm David Green. He's Christian Baschelder and this is mortgage Monday.