Homeowner Insurance Coverage

by John T. in Santa Clara, California and more

Is homeowner insurance coverage delaying your refinance? John's mortgage broker says the lender does not accept his home owner's association insurance coverage. A second homeowner can't get the money sitting in his escrow account refunded to him, even though it belongs to him.


Question 1: Lender Balks at Homeowner Association Insurance Coverage

By John from Santa Clara

Hi Kate, Thanks for being here.

I am at day 45 of a 45 day rate lock for refinancing. My Mortgage Broker said the potential lender does not like our Home Owner's Association insurance coverage.

The HOA policy insures up to $8,700,000 for rebuilding or reconstruction. With 32 single family homes in this PUD, that is $272,000 per unit. I am refinancing $240,000.

But the lender wants my unit called out with a specific amount. The Insurance Company can't do that.

If this process fails, can I recover appraisal costs? Is there a arbitrator for this issue? Thanks, John

***zz-portrait-left.shtml*** Ask Kate answers: Lender Balks at Homeowner Association Insurance Coverage

Hi John,

Have you sensed fading interest among loan originators once they realized your home was involved in a Homeowner's Association?

Right or wrong, this is why! The ongoing battle between insurer and lender with homeowners caught in the cross hairs is a complex debate.

1. Is the insurer obligated to change the verbiage in the insurance coverage?

2. Or is the lender obligated to accept the existing insurance coverage?

Get Involved in Your Refinance

The fate of the homeowner's refinance requires a meeting of the minds. But this does not always happen easily. Instead, no, never, and no way can dominate the correspondence between insurer and lender.

And as you are finding out, the homeowner is often left in the lurch.

So I suggest getting involved! Don't leave this up to your lender. Call the HOA insurance agent to ask if there are laws in California that prohibit the lender from asking for a breakdown in coverage. You can also try asking if they would comply with the lender's request.

Many times, you can get more action than the lender because you're the paying customer. Let the insurance company know this is the only factor standing in the way of completing your refinance.

If all else fails, talk to other homeowners in your association and ask who they used to finance their property.

Reimbursing Property Appraisal Fees

Generally speaking, you are not entitled to a reimbursement after your property appraisal has commenced. Read your paperwork which should address your rights and obligations.

For everyone else who is reading, this is a question that is perfect to ask before applying for a mortgage!

Go here for more details: Why Insurance Agents are Important to Your Refinance.

Best wishes,


Question 2: HARP Refi and Homeowner Insurance Refunds

Kate, I'm refinancing with HARP. I have $2100 sitting in my escrow for insurance, but I'm told they can't give it back to me. They have to deduct it from the loan balance.

However I also have to pay one year plus 2 months escrow at closing. Is that legal?

***zz-portrait-left.shtml*** Ask Kate answers: HARP Refi and Homeowner Insurance Refunds

It is not unusual for your new loan balance to be reduced by the amount held in the escrow.

HARP 2.0 is a limited cash-out refinance. That means you may receive no more than $250 cash at closing.

If you were given the $2100 sitting in your escrow account, you would no longer be eligible for high loan-to-value HARP mortgage approvals.

Request to Finance Your New Insurance Reserves

Financing fresh escrow reserves in your new mortgage is also a customary guideline for mortgages that include property tax and homeowner's insurance in the monthly payment.

Or is the lender asking you to pay the reserves in cash? If so, ask why your reserves can't be financed! Is it that...
  • Your loan amount would be higher than the conforming loan limits?

  • Or exceed the artificial loan-to-value restriction of your HARP lender?

  • Or is the lender charging you so much in closing costs that it leaves no room for financing your escrows?
Be persistent until you get straight answers. Remember, it's your mortgage, not the lender's. You are responsible for making the payments for years to come, again NOT the lender. So you deserve answers!

Go here for more details on refinancing, including escrow accounts: Kate's Mortgage Refi Tips and Answers.

Best wishes,


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