Interesting Mail From My Homeowners' Insurance Provider

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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. House burned in fire

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.


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Yvonne Burdette-Van Camp
To Buy and Sell Real Estate, see me at Southwest Missouri Realty - Springfield, MO
"Home"work, I have the Answers!

              I cannot imagine burning a house down to get out of a foreclosure.   I bet we see more and more of this, but let's hope not!

Sep 21, 2011 02:45 PM #1
Marte Cliff
Marte Cliff Copywriting - Priest River, ID
Your real estate writer

Yvonne - I can't imagine it either, but then I can't imagine burning a house to collect the insurance under any circumstances.

Sep 21, 2011 03:10 PM #2
Debbie Gartner
The Flooring Girl - White Plains, NY
The Flooring Girl & Blog Stylist -Dynamo Marketers

Yes, I had the same reaction - people are trying to avoid foreclosure.  I guess they also forget that arson is a crime.

Sep 21, 2011 11:24 PM #3
Chris Ann Cleland
Long and Foster REALTORS®, Gainesville, VA - Bristow, VA
Associate Broker, Bristow, VA

I know things like this are going on all over our country.  Desperate people are doing awful things to get out of their mortgage.

Sep 22, 2011 04:41 AM #4
Marte Cliff
Marte Cliff Copywriting - Priest River, ID
Your real estate writer

Debbie - Yes, they probably forget that small detail, or simply think they won't get caught.

Chris Ann - It's terrible to think people can be that desperate.

The more I think about this, the more I think the letter I got wouldn't stop anyone who lives on a small lot in town. Perhaps the only ones getting this letter are people like me, with a house on acres with other buildings.

To the best of my knowledge, the insurance has to cover the mortgage, but in my case, the shop and other buildings are listed separately on the policy, so if the house burned, and if I had no equity, I COULD end up still owing - even though the insurance company would then own the land and the outbuildings.

Sep 22, 2011 05:22 AM #5
David Gibson CNE, 719-304-4684 ~ Colorado Springs Relocation
Colorado Real Estate Advisers LLC - Colorado Springs, CO
Relocation, Luxury & Lifestyle residential

Wow Marte, they just don’t want you to have any fun:)

Good reminder about getting insurance on “rural” properties, not always easy or cheap.

Sep 23, 2011 03:59 AM #6
Ruthmarie Hicks
Keller Williams NY Realty - 120 Bloomingdale Road #101, White Plains NY 10605 - White Plains, NY

It's sad to think that people might be this desperate.  Let's hope we don't see an upsurge in "profitable" fires.  I haven't heard of it yet, but it could happen.

Sep 24, 2011 02:12 PM #7
Evelyn Johnston
Friends & Neighbors Real Estate - Elkhart, IN
The People You Know, Like and Trust!

Marte, I haven't heard of this either so cannot say whether it is a new way to avoid foreclosure.  Sure would be scary though...

Sep 26, 2011 03:22 PM #8
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