Manufactured Housing News

Whether you’re already the proud owner of a manufactured home or you’re in the market for manufactured home financing, we strongly recommend that you read this post. Why? Because the following paragraphs reveal critical information about one of the factors that can dramatically affect your overall homeownership experience: namely, forced placed homeowners insurance.

 As part of loan agreements, manufactured home lenders routinely require borrowers to purchase and maintain appropriate homeowners insurance over the life of the loan. When homeowners fail to meet this condition, lenders have the right to purchase a homeowners insurance policy on behalf of borrowers and add the premium to their monthly mortgage payments. This type of insurance is known as forced placed homeowners insurance, also referred to as “lender placed” or “creditor placed” insurance. A lender can force-place homeowners insurance when:

• the borrower cancels the existing policy or fails to renew it;
• the homeowner doesn’t provide proof of coverage with the lender shown as the mortgagee;
• the amount of insurance is insufficient to cover the cost of repairing or replacing the home in the event of a disaster; since lenders use forced placed insurance to protect their financial interest in the collateral of the loans they issue, according to the Department of Financial Services, the insurance policy should provide enough coverage to allow for the full repayment of the home if it’s damaged or destroyed;
• the type of coverage chosen by the homeowner doesn’t meet the requirements of the loan agreement.

Understanding the Disadvantages of Forced Placed Insurance

Although many manufactured home owners complacently accept forced placed insurance and fail to shop around for a better deal, this type of insurance carries potential disadvantages such as:

• A higher cost – The Consumer Financial Protection Bureau confirms that forced placed homeowners insurance is often more expensive than what a homeowner could get on his own. Although the risk aversion associated with forced placed insurance justifies the high premiums charged, the conclusion is that most homeowners end up paying a higher premium, which is rolled into the monthly payment. If a borrower is already having difficulty making loan payments, a higher insurance premium may hinder him from staying current on his loan. Therefore, the high premium of lender-placed insurance could become the final tipping point for at-risk homeowners teetering on the brink of foreclosure. Please note, not all lenders do this, but some do and homeowners need to be aware of this.
  
  
• Limited coverage – Despite the higher cost of forced placed premiums, the coverage offered by this type of insurance may be significantly limited compared to a policy you can purchase on your own. Designed to protect the lender and not the homeowner, forced placed homeowners insurance typically includes coverage to pay off the outstanding balance of the home loan. Unlike the standard manufactured home insurance, forced placed policies usually offer zero coverage for the personal property like furniture, electronics, clothing, etc., and most lack liability protection as well.

Taking Action

If your lender has purchased homeowners insurance on your behalf, there are two things you can do to have the policy removed.

• Immediately provide your lender with copies of your policy, if the policy has been continuously in effect and shows your lender as the mortgagee.
  

• Buy a new policy from a reliable, experienced insurer like Triad Financial Services,Inc and provide proof of coverage to your lender. Once you provide evidence that you have homeowners insurance that meets the requirements of your loan agreement, the servicer will need to cancel the forced placed policy.
  

Until you sort out your homeowners insurance-related problems, we strongly advise that you pay the premium of the forced placed policy. When lenders purchase this insurance, the cost of the premium is tacked on to the monthly mortgage payments the borrower needs to cover. If you deny paying for insurance, you’ll be at risk of defaulting on your loan. After canceling the forced place policy, your lender will refund any premiums paid for overlapping periods.

Getting adequate homeowners insurance for your manufactured home is important not just to meet your lender’s requirements but also to protect your dream home against unexpected events. Although there’s no reason to opt for an insurance policy that provides more coverage than it is necessary, the homeowners who want to properly insure their homes should definitely consider getting homeowners insurance coverage for the replacement cost value of their new home – not just for the amount of the loan balance.

For more information on manufactured home insurance coverage, please get in touch with our experienced insurance professionals today by calling 1-401-524-7641 or emailing insurance1@triadfs.com.