Introduction to Homeowner Insurance & Lender Responsibilities | Episode 40

Summary

Podcast Summary: The David Greene Show - Episode 40: Introduction to Homeowner Insurance & Lender Responsibilities

Podcast Information:

• Title: The David Greene Show
• Host: David Greene
• Guest: Christian Bashelder, Broker and Owner of The One Brokerage
• Episode Title: Introduction to Homeowner Insurance & Lender Responsibilities
• Release Date: March 17, 2025
• Description: In this episode of Real Talk Real Estate with David Greene, host David Greene is joined by Christian Bashelder to delve into the critical aspects of homeowner insurance and the responsibilities lenders hold in managing these policies. The discussion centers around real-life scenarios, expert insights, and practical advice for real estate investors to navigate the complexities of insurance payments and lender interactions.

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1. Introduction and Episode Overview

[00:00] David Greene (A):
"What's going on, everyone? I am David Green, host of the David Green show, and I am here with Christian Bashelder, broker and owner of the one brokerage. And today we are going to be talking about. Christian, take it away."

David sets the stage for the episode by introducing Christian Bashelder and outlining the focus on homeowner insurance and lender responsibilities.

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2. Understanding Homeowner’s Insurance and Its Collection by Lenders

[00:41] David Greene (A):
"Okay, so break it down for us, Christian. Let's start off by just describing what is homeowners insurance and why is it normally collected by the lender?"

[00:51] Christian Bashelder (B):
"Yeah. So the lender obviously cares about you paying them back. That's called your principal and interest... So the T is your property taxes. That's what you owe the state or county... Now, the one that we're going to focus in on is your homeowner's insurance because on our previous episode, we discussed what happens in the if the house is destroyed..."

Christian provides a comprehensive breakdown of the PITI components (Principal, Interest, Taxes, Insurance), emphasizing the crucial role of homeowner's insurance in protecting both the borrower and the lender’s investment. He explains how monthly payments are allocated towards insurance and property taxes, ensuring the property remains safeguarded against unforeseen events.

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3. Case Study: Lender Fails to Pay Insurance

[00:51 - 03:41] Christian Bashelder (B): Christian delves into a specific incident involving a Houston couple affected by Hurricane Barrel. He explains how the lender failed to pay the homeowner's insurance despite the borrower diligently making monthly payments. This negligence left the property uninsured during a critical time, leading to significant financial loss for the homeowners.

[02:30] Christian Bashelder (B):
"The lender put it back on them saying, we sent you mail. How easy is it to avoid those of you who get mail like I do..."

Christian highlights the complexities and potential pitfalls when lenders mishandle insurance payments, stressing the importance of homeowners actively verifying their coverage.

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4. Lender’s Defense and Homeowner’s Responsibility

[03:41] David Greene (A):
"Now, in this case, the lender is saying that they mail documents to the person's house, but that the address may have been incorrect... the lender was supposed to be paying it. So what advice do you have for real estate investors who might have an impound account set up with the lender and assume that it's being paid because they're being charged for it?"

David raises the issue of lenders deflecting responsibility and places emphasis on the homeowner's role in ensuring their insurance is active.

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5. Expert Advice for Real Estate Investors

[04:20 - 07:17] Christian Bashelder (B):
Christian shares actionable advice for real estate investors to prevent similar issues:

• Set Reminders: He recommends setting calendar reminders for property tax and insurance due dates.
• Direct Verification: Actively contact insurance companies and tax authorities to confirm payments.
• Monitor Mortgage Statements: Regularly review mortgage portals to ensure that insurance and taxes are being paid as intended.

[06:50] Christian Bashelder (B):
"Make sure your insurance is there. Make sure your property taxes are paid. Very important... It's annoying that you have to do this. The alternative is you can waive your impound accounts and you can just pay them yourselves."

Christian underscores the importance of proactive management and communication with lenders to safeguard one's investments.

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6. Communicating with Lenders and Contact Information

[07:17] David Greene (A):
"If people want to call and check on you... What's the best way to get ahold of you?"

[07:28] Christian Bashelder (B):
"[e-mail] is just our company website... The one Broker on Instagram is the best way to get me if you're trying to get in touch with me directly."

Both hosts provide their contact information, encouraging listeners to reach out for further assistance and support in managing their real estate investments effectively.

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7. Conclusion and Final Thoughts

[07:41] David Greene (A):
David wraps up the episode by reiterating the importance of being vigilant regarding homeowner’s insurance and lender responsibilities. He emphasizes the potential risks of neglect and the benefits of staying informed and proactive.

"Thanks, everybody for listening. We hope this was eye opening for you and we hope we save somebody from falling into the trouble that this Houston couple unfortunately found themselves in... We're the one brokerage. We'd love to finance your real estate."

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Key Takeaways:

• Understanding PITI: Grasping the components of mortgage payments is essential for managing real estate investments.
• Lender's Role: Lenders are responsible for managing insurance and tax payments, but homeowners must verify these actions.
• Proactive Management: Regularly checking with insurance providers and tax authorities can prevent costly oversights.
• Communication: Maintaining open lines of communication with lenders and brokers is crucial for timely updates and resolutions.
• Expert Guidance: Seeking advice from professionals like Christian Bashelder can provide valuable insights and strategies for safeguarding investments.

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Notable Quotes:

• Christian Bashelder (02:30):
  "The lender put it back on them saying, we sent you mail... How easy is it to avoid those of you who get mail like I do..."

• Christian Bashelder (06:50):
  "Make sure your insurance is there. Make sure your property taxes are paid. Very important... It's annoying that you have to do this."

• David Greene (07:41):
  "We hope we save somebody from falling into the trouble that this Houston couple unfortunately found themselves in."

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Conclusion:
This episode of The David Greene Show serves as a crucial resource for real estate investors, highlighting the importance of understanding homeowner's insurance and the responsibilities lenders hold. Through real-life examples and expert advice, listeners are empowered to take proactive steps in managing their investments and avoiding potential pitfalls.

Transcript

[A]

What's going on, everyone? I am David Green, host of the David Green show, and I am here with Christian Bashelder, broker and owner of the one brokerage. And today we are going to be talking about. Christian, take it away.

[B]

What happens if you watch the previous episode, I foreshadowed this. What happens if your lender doesn't pay your insurance, which is we'll go down this whole crazy spiral of a, of a client, not a client of ours, but a person, person in this news article that this happened to. So it's not some crazy, unhappenable event. It happened to sounds like this Houston couple who was uninsured during Hurricane Barrel. So we'll, we'll discuss what happens when that comes.

[A]

Okay, so break it down for us, Christian. Let's start off by just describing what is homeowners insurance and why is it normally collected by the lender?

[B]

Yeah. So the lender obviously cares about you paying them back. That's called your principal and interest. For those of you familiar, PITI stands for what your monthly payment is. The first P and I are easy. That's what you owe the lender for the repayment of the loan. The second I is insurance. That's your homeowner's insurance. That's what pays to protect the property. That's what comes from, you know, your Geico, your Allstate, your state farm, your farmers, whatever you choose to use for your insurance company. And then the T, obviously the final letter, I guess it's the second to last, but I did a matter of order. But the T is your property taxes. That's what you owe the state or county or, you know, whatever governing entity that is that is managing the property. Now, the one that we're going to focus in on is your homeowner's insurance because on our previous episode, we discussed what happens in the if the house is destroyed in a hurricane, in a flood and a fire, in a tornado, whatever happens, Right. And typically, your insurance policy will cover you for the losses. They will help you rebuild the house. They will cover you for any loss of rents that you have on a rental property or your living expenses during your displacement from that house. Now, what happens if, unfortunately, like what happened to this Houston couple in this, I think this is an ABC13 article here. When your lender, you pay your PITI every month to your lender, that means you're paying monthly installments of your insurance and your taxes and your lender is holding that for you. And during the end of your billing cycle, they go and they collect 12 months of insurance and they pay your homeowner's policy. They collect 12 months of taxes, maybe six months. If you're billed every six months but the full year and they pay your property taxes for you, the lender has an incentive to do that. The lender wants to make sure the house is properly insured and obviously that the property taxes are paid. Those are the only things that can impact the lender's investment into your house. Now, this lender sounds like they have quite a, quite a lawsuit coming their way from the sound of it on this article. This lender did not pay the home insurance and this house was a loss during Hurricane Barrel. What that means that the lender was collecting every month. They were collecting the payments from the borrower and for whatever reason, maybe somebody quit, maybe somebody messed up, maybe somebody goofed, who knows? The insurance was not paid and the renewal notices was most likely sent to the lender and said, hey, you owe us money, you owe us money, you owe us money. And the lender did not repay it. The lender made a mistake and that led to, during the time of this loss, during the hurricane, the house not having coverage, which is the worst case scenario for a borrower that is doing the right thing and paying their mortgage every month and yet still does not have the coverage they were led to believe they were paying for.

[A]

Now, in this case, the lender is saying that they mail documents to the person's house, but that the address may have been incorrect. That can happen a lot of the time when you sign up for insurance. You lived in one place, then you move somewhere else, it doesn't get updated. So the lender and the banks are always going to do everything that they can to say, this is not on us, you have to pay for it. And I'm guessing it's going to come down to the fact that they're going to say it was the homeowner's responsibility to make sure they had insurance, even though the lender was supposed to be paying it. So what advice do you have for real estate investors who might have an impound account set up with the lender and assume that it's being paid because they're being charged for it?

[B]

Yeah, this is a tricky one because there shouldn't be a need for advice for me to give here. If the lender's collecting it, they should pay it. Now, what most lenders do, I've had this happen to me personally. I own a property in Florida. I gave the lender and this was me I originated the loan, I got the loan, but that loan got sold after I closed it. Okay? So the company that I was originally paying payments to was not the company that now owns the mortgage they're supposed to transfer. And now I pay the new company. Supposed to be super easy. That new company did not get a copy of my original insurance policy. So when that policy expired, the lender said, hey, we haven't received a new policy. We're going to buy one for you. And if you guys know anything about what's called force placed insurance, that's where the lender forced forces. An insurance company, they almost always choose the most expensive option. They choose a really like way, way, way higher policy than what you need because now they have a stake in the matter. Right now what I do is I see my monthly payment surge by $1500. Something crazy, right? And they say you owe us this amount because we had to buy a new policy and now you're paying us based on this new insurance. I went and showed them that I renewed my original policy and got it replaced. That sounds like a lot. If you're paying your monthly insurance, my advice to you was be set a note on your calendar when your property taxes are due, whether it's every six months or every year, and set a note on your calendar when your insurance is due and just give them a call. Hey, Allstate, did you get, you get my premium this year? Are we good? Yep. You're renewed through 2025. Beautiful. Cool. Thank you, Bye. Same thing with the inch, with the, with the city taxes. Hey, city of Los Angeles, did you get my property taxes this year? Yep, you're all paid up. Cool. Okay, click, buy. Just doing that simple act can save you a very unfortunate scenario like this Houston couple where if something just wasn't unpaid and the lender puts it back on them saying, we sent you mail. How easy is it to avoid those of you who get mail like I do, Some of our listeners who may have 5, 10, 15, 20, 30 homes. David, I know if somebody tried to get you by mail, it ain't happening. Yeah, right, me neither. It's, it's, it's tough. Especially when you get just piles and piles and piles like many investors do. Give them a call. Make sure. Check your mortgage statements on your portal right when you go in and make a payment. Check them every six months, every 12 months. Make sure your insurance is there. Make sure your property taxes are paid. Very important. It's annoying that you have to do this. The alternative is you can waive your impound accounts and you can just pay them yourselves. That's also tough because you got to remember 20, 30 different sets of bills. That's, that's also a hard thing to do. Your lender, 99.9% of time is going to make be making these payments for you for that. 01% of the time. Call the check to make sure you don't find yourself in that position. That's the best advice I can give.

[A]

That's great advice. If people want to call and check on you, they want to tell you that you look handsome today. They want to ask a question about financing or they want to get a loan. What's the best way to get ahold of you?

[B]

Absolutely. [e-mail] is just our company website. That's where you can find out more information about us. And the one Broker on Instagram is the best way to get me if you're trying to get in touch with me directly.

[A]

All right, you can find me at davidgreen24 on Instagram. Give me a follow over there. Or you can find me at davidgreen24.com or realtalkrealestate.com where you can learn more about the show. Thanks, everybody for listening. We hope this was eye opening for you and we hope we save somebody from falling into the trouble that this Houston couple unfortunately found themselves in. We're the one brokerage. We'd love to finance your real estate. So give us a shot and see why we're one of the top brokers in the nation. I'm David Green, he's Christian Bashelder, and this is Mortgage Monday.