I had a client call me this weekend that just received some alarming news. Their mortgage recently got sold to a different lender. She had two different issues:
1.) Their mortgage had sold to another lender and now the new lender was requiring flood insurance on the home, which WAS NOT REQUIRED BEFORE! She was startled, as the new insurance premium was said to be hundreds of dollars a month! So naturally, the homeowner didn't want flood insurance and wanted to find a lender that would refinance the home without needing it.
So, here is my response....
When you purchase a home, and it is financed, the lender will ALWAYS require that you get flood insurance if your home sits in a Flood Zone, the appraisal will show this through a National Database. This protects the lender, in the event that such a case takes place. For example, the snapped levies and tragedy in Louisiana. Within the disclosures of your mortgage, it will also state that in the event your home lies within a NEW, REMAPPED Flood Zone, you will be required to obtain Flood Insurance to protect yourself and the lender. With that being said, this is what happened to them. Their home was in a "rezoned area" and they must now obtain flood insurance. The lender has the right to make such a request and now my clients must make a decision.
Pay for the Flood Insurance or sell the home and find one that isn't in a flood zone. It is important to note that you have the obligation to disclose the home is now in a flood zone if you put the home on the market...It will be found out through the appraisal anyhow!
The geographical landscape is ALWAYS CHANGING! So, you may have purchased a home that WAS NOT in a flood zone and it is now determined by the FEMA map that IT IS in a flood zone!
2.) The client wanted a lender that wouldn't sell their mortgage to someone else, to prevent this from happening again.
Lenders typically want to keep all of their options open, in order to remain "liquid." With that being said, the disclosures that you sign on a mortgage will almost certainly contain a disclosure that allows the lender to sell your loan or sell your loan and continue to service it. There is NO GUARANTEE that your loan won't be sold off to another investor or on the open market. This is typical. There are lenders that have a "track record" of not selling mortgages to another investor, but there are certainly no guarantees unless it specifically says so in the loan documents (unlikely!)
Scott Gormley
Broker/Owner
Oak Valley Mortgage
2006 Chico Assoc. of Realtors Affiliate Chairman
Direct: 530.592.8362
Fax: 530.267.5555
Website: http://www.caloan.com/
Blog: http://www.caloanblog.com/
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This is a serious national problem. Problem for your folks is that there is no guarantee that anyone will buy their home at market or anywhere near market.
I believe it's time we stopped subsidizing the mansions on The Outer Banks.
Lenn