Today's mail brought a letter from Grange Insurance, informing me of an endorsement which changes my homeowners' policy.
Since it was written in legalese gobbledy-gook, it took a few reads through to figure it out. But finally, I think I have the gist…
If I default on my mortgage, my lender or lenders will be the ones to collect if the house burns down.
Even more interesting: My insurance company can pay off my lender and deny payment to me, and in so doing, the insurance company will gain ownership of "all securities held as collateral to the mortgage debt."
However, it further appears that if the amount of insurance paid isn't enough to cover the mortgage balance, I'll still be liable.
I don't intend to default on my mortgage payments, but still, I wonder…
What was THAT all about?
I don't have any facts, so this is just speculation. But I'm wondering if folks have started burning their homes in order to get out from under the mortgage and avoid foreclosure? And maybe, for people who had some equity, it seemed like a way to put a few dollars in their pockets at the same time?
Years ago we used to hear about people burning their homes for the insurance money – in fact my Aunt had tenants who burned HER house to collect on their renter's insurance. There used to be a man in this small town that everyone knew would get the job done for a price.
Burning to avoid foreclosure is a new twist, but it looks as if Grange Insurance has closed that loophole.
Another thought: Lately I've considered moving my insurance to a different carrier, but it appears that I can't. Grange Insurance is one of the few companies that will insure a "home in the woods," and my local agent is one of the few who writes for Grange Insurance. We're right on the edge of a fire district, but far enough away that I doubt a fire truck would get here in time to save the house if it atually caught fire.
Maybe they're targeting homes in our "insurance zone?"
Has anyone else gotten a similar letter?
Image courtesy of Dreamstine.