Make sure your taxes and insurance are being paid! : Rooftop Views

Rooftop Views

Make sure your taxes and insurance are being paid!

Sylvia Ponce is senior vice president of operations for Fidelity National Information Services' Home buyers Financial Network (HFN). She reminds all of us to be aware of what is going on with our mortgage company and check to make sure they are making payments on our behalf.

As the mortgage and real estate industries face unprecedented times, homeowners could very well be left to pay the bills, literally. Mortgage companies are going out of business or declaring bankruptcy every day. When that happens, their assets can be frozen, which means they cannot transfer any funds, including the funds they owe on behalf of homeowners for hazard insurance (and other types of insurance) and real estate taxes.

Most homeowners do not receive confirmation of payment of insurance or real estate property taxes. The assumption among them is that they pay the monthly escrow amount and never need to consider those items. However, recent examples have shown that might not always be the case. There are a few simple steps homeowners can and should take to verify payment of their escrowed items.

Insurance

While the primary purpose of insurance is to protect the interests of the lender, having a lapse in hazard, flood, wind and other types of insurance could have a significant impact on homeowners, especially if they have equity built up in the home. If an insurance payment lapses, carriers will immediately cancel the insurance policy.

Homeowners should proactively monitor their policies. Most insurance companies provide policy information online. If not, the insurance agent should be able to access the information. Either way, it is easiest if homeowners have their policy numbers, but if they do not, insurers have other methods of locating the policy information. Using the Internet or a phone call, in less than five minutes, a homeowner can confirm whether the insurance premium has been paid.

If a homeowner finds out that a premium has not been paid, there are two options. The homeowner can contact the mortgage company directly regarding the payment or can request the insurance agent do it on his/her behalf. It is important for homeowners to keep their policies' expiration date in mind because once the policy expires, they will have no protection against losses.

If the insurance is not being paid and the mortgage company is not helpful, the individual can also contact the state Insurance Commissioner's Office or other agencies that govern insurance. Homeowners should contact the office in the state where the property is located, regardless of where the mortgage company is located.

The best advice if the deadline is approaching for the insurance to be paid, and the fear is it will not be paid or not paid on time, is that the homeowner make the payment, document it and then seek reimbursement from the mortgage company. This prevents the insurance from being cancelled.

In states like Florida and Louisiana that have experienced significant damage from hurricanes in recent years, it has become very difficult to get insurance. If a homeowner's insurance is cancelled, it will be even more difficult to get a new policy as that person will be moved to a higher risk category due to the lack of payment. This means that if they can get a new policy, they will be paying more for it. This is just one more reason why it is important for homeowners to monitor their insurance payments.

Real Estate Taxes

Real estate taxes are not as critical as insurance from a payment perspective because there is no threat of cancellation; however, if taxes are not paid, the homeowner will be assessed penalty fees as a result of the delinquency. Eventually, a tax certificate can be held against the property, and, as a last resort, the property could be auctioned to cover the delinquent tax bill. While this is a lengthy process, legal fees are incurred throughout each step for which the homeowner could be responsible. This becomes very costly. Plus, the longer the process takes, the more difficult it becomes to unwind.

Most tax authorities provide information online, so a good recommendation is to go online to confirm payment of real estate taxes. However, if the particular taxing authority does not provide this information online, homeowners can contact them via telephone. Have the tax folio numbers, parcel numbers and/or legal descriptions available when calling.

Again, if a homeowner fears the taxes are not being paid, it is best for them to pay the bill and keep record of the payment to seek reimbursement from the mortgage company. The reimbursement process is a common, well-established process with mortgage companies, and it should be rather painless as long as the homeowner has good documentation.