Second Mortgage $hocker

[PetMom]

We originally got a Ditech loan (which I thought was a good company - but assumed it would be with them for the full loan - wrong).

This was sold (much like mortgage loans are) to another company. GMAC. That's general motors by the way.

Things were great, a raise was gotten, we were actually affording organic food, and we knew we
would be hit with increase in health insurance come this Jan. We were: $80.00 per month deducted. But then another surprise was on it's way.

The bill comes for our second equity loan. We expected the typcial $240.00 per month (have had this for about 4 years and it is for $20,000). We have our equity of about 47,000 in this home (it does sometimes pay to stay in your tiny starter home for years - or at least it had).

No other debt or credit cards and I had been concerned with this second equity loan.

The Shocker:

The new buyers of the loan decided we need flood insurance.

Our original mortgage holders in nearly 20 years have never required this.

GMAC wants it for their stake for the added amount of $120.00 per month!

That is going to be a $360.00 bill which we can swing but seems excessive.

I told my husband they have all the power when you have a collaterized loan. They are just chomping at the bit for all the unwitting fools who signed up and now they can make such a raise and watch for those who fall behind and they can legally get your home. A lot of people this would financially break and put them out on the streets.

If it had even been for $60.00 that would make sense - but this amount is a financially prohibitive amount.

We are going to call them, but I realize we may not have much say in this.

Any insurance pros or people that have had this happen?

And word to wise: don't get a second equity loan! They do not keep their rates at the same for the full amount and can almost double them at any time on their whim.

They sound like how credit cards are now, which we won't touch.

Is this even worth fighting? I am sure Insurance Board would defend them. We are also excluded from flood ins. for main mortgage because of the '100 year rule'.

Insurance: you get a cut in pay and get a raise in a debt - works both ways.

Any feedback appreciated.

[irmanator]

Cant you shop around and get your own flood ins?

[bjl584]

Can you refinance the loan and get it out of the hands of GMAC? Maybe try a local bank to do business with?

[snafu]

Did you sign a new agreement when your loan moved from Ditech to GMAC? Does your Law Society operate a recorded information line? You need to check the legality of contracts changed on whim by the supplier, particularly the new demand for Flood Insurance. It is certainly practical to get three bids/estimates from other Insurance firms or an Insurance Broker. In my experience, when the consumer takes the initiative to learn the law and pushes back in a polite but firm manner, the supplier will back down. They count on the individual being fearful of a giant like GMAC.

[PetMom]

They state they 'have purchased it for us'. And they got it for us through someone they chose.
Already a done deal.No we have not signed a contract for a new transfer of the loan. But we never have when our main mortgage changed hands over the years. We did check to make sure the amount did not have some added amount put in.

[Joan.of.the.Arch]

PetMom, I think you probably need to find out if you also will be getting told to purchase flood insurance for your primary mortgage, too.

The Army Corps of Engineers and its contractors have been evaluating levees and flood plains along the Mississippi, its tributaries, and artificial agricultural bayous that drain what was mid-continental swamp 160 years ago I presume they do this along other rivers as well. Many, many people find their property has been reclassified as being subject to flooding at a higher probability than previously. (Changes in rainfall patterns plus aged, weakened levees, plus greater understanding of the interaction of water and levees.) Many people are livid at the reclassification and at the inaction of the federal government to rework the levee system to protect them and make insurance unnecessary. Some would just rather take their chances with not having insurance, but if you have a loan on or collateralized by your home, you'll have no choice.

My understanding is that mortgages are usually written so that they can indeed require flood insurance in that case.

[PetMom]

We read the bill that came in at $360.00 and did not realize that is only for three payments of the year. Finally read the rest of letter and realized the actual facts. Thought that seemed rather high. And we will shop around for better rate.

And Joan of the Arch you are right - our main mortgage (without raising payment - got it out of escrow, nor a letter explaining this) tacked on their flood insurance.

We will be able to shop for a better price for that.

Seems they are all concerned a small easement behind our fence is in a FEMA flood zone.

Husband wanted to do a LOMR or proof that does not affect house through flood zone records.

Now I am more towards keeping flood insurance. Think of how wacky the weather is getting and always so sad when people stand there and say they did not have flood insurance. Might be a good idea after all.

And thanks for tip to find another mortgage lender for second equity. We actually went on to apply for a refinance with the second thrown in. Hope it goes through.

Thanks for all feedback it really helped.

[Like2Plan]

PetMom,
Definately get your own quotes. Also, find out exactly what the flood ins that was obtained through the mortgage holder will cover. Will it cover only their liability? Or, will you have any double coverage between the two mortgage holders that you don't need?
As a general rule, ins obtained through the mortgage holder is more expensive than if you obtained it yourself--but, you never know maybe they are the exception.

[wincrasher]

Anything that is force-placed is going to be 3 times what you can get on your own. Also, what the bank has bought only covers them. My flood insurance in Florida - in a full blown flood plain - is $500 a year.

You should have gotten prior notice that this insurance requirement was coming and a chance to comply. If not, then they have violated the law.

Check your mortgage contract and check all your correspondence from GMAC. If you can get your own policy, provide them proof and get a refund then do it. If they won't give you a refund, talk to a lawyer.

Good luck!

[PetMom]

Yes, it did concern me that we were not notified (taken out of escrow) about the insurance added on our main mortgage without our knowledge and no higher amount on mortgage - in other words we had no idea they had done this - quite sneaky and the amount was about app. $800 per year.

Been in this house for 18 years.

Then the second mortgage who does not have an escrow to dip into obviously just sent us a higher bill and informed us of the reason - at least they explained it - app. $250.00 added on per year.

And they went by the FEMA report.

That did concern me if we were covered and thought we were.

Now realize we are not and bank is looking after it's own interest.

Many people not wanting to go through tedious appeal process (lots of paperwork) or even knowing how to read a FEMA flood map would not know what to do.

Again, I am more for having it, but thought all this would cover us and we would just get a cheaper rate (both said we can shop around).

So with insurance on our property that is a popped on amount of app. $1,000.00 per year - an amount many would not be able to afford. Now we need to look into rates for our coverage. Small wonder people stand outside their flooded homes and claim they did not have the insurance coverage - they did not have the money for it.

[Joan.of.the.Arch]

PetMom, Don't know where you are, but you might want to do a news search regarding flood predictions for your area for 2011. I happened to stumble across a bad prediction for the Fargo-Moorhead area this morning. 2011 Flood: Local, State leaders prepare for the worst | WDAY | Fargo, ND

I live near the high point of my riverside city and some miles from the river, but because we keep a boat well upstream, we are always aware of the floods. It has been so bad for three consecutive years now that we are thinking of selling the boat. Most of the spring and summer, we have not been able to even get to the marina as the river swells so much that the boat is effectively moored in the middle of the river! We would have to hire a boat to even get to our own boat.

I think anyone who is getting news of being re-classified into flood zones needs to take it seriously. Not only in having insurance, but in planning ahead. Like, should you really store things in your basement or garage?? Should you raise the level of your backyard shed so that you can store things there? That is definitely something I see along the river--raised sheds, barns, and garages. Sometimes they are raised on berms of earth and sometimes on stilts. Should you even install your own permanent flood walls?

[MonkeyMama]

I just had to add - insurers will buy insurance for you in certain situations, but it is sky high and you should always have the right to buy your own insurance. (I hadn't thought that it covered them more than you - but good point).

That said, flood insurance is a different kind of animal. We have to buy ours directly from FEMA, for one. But the insurer may charge a huge premium to simply be the go between. I would certainly talk to an insurer and see what a policy should cost.

Of course, if a mortgage company thinks you should have flood insurance, I agree, you probably should have it anyway.

We are currently in a flood zone war so how much insurance we are required changes with the wind in my neighborhood. The flood rating has always been little more than politics. (Depending on the year we have been a 10-year-flood zone or a 500-year-flood zone. The truth is probably less than 100, though they are furiously repairing levies. Thing is we lie low and are only protected by levies. As such, I don't care what they call it - we will have flood insurance). As such, we bought insurance the day we moved in. But we initially had insurance through the same company we have our home insurance with, and now are billed directly by FEMA.

[MonkeyMama]

P.S. I know a little about mortgage companies and their insurance tactics because they once sent me a $5k+ insurance bill because they hadn't gotten some proof of our condo HOA insurance coverage or some nonsense. Had they asked I would have gladly sent it. I remember they really played hardball with that BUT since we didn't have an impound account they couldn't force us to pay it. I have no doubt they would have took it, otherwise. $5k was clearly ridiculous!

All the more reason not to let the mortgage company pay your taxes and insurance.