Mortgage insurance scam

[golo]

Enlight me on this MO from some of the mortgage lenders as I don't understand. My mortgage lender is WF and they required me to increase the coverage of the mortgage insurance, ok cool, but here is what i don't understand as the insurance co explained me that they will only pay for rebuild the house not the land. So, WF got me to raise the insurance for the purchase price and the insurance co will only pay to rebuild? The insurance co say that in the land can get destroy( make sense to me) hurracane, fire, hail, i mean, the land is is there. Ok, it has to be a heck of an earthquake to destroy the land.You know what i'm saying. 

Anyways, the way i see it is that i'm over insuring my house and over paying just because of the bank? It's a waste of time arguing the case with the bank as they have the pan hold from the handle. Who would over insure a that is worth 20k for 40k and end up paying more obvously? SMH

[StartingOver10]

You are not talking about mortgage insurance - you are talking about Homeowners Insurance.

Mortgage insurance is paid by the borrower or the lender to protect the lender in case you default on your payments to the lender.

Homeowners insurance insures the property (house) against perils like fire, lightening, hail and other damages to the home.  The lender requires full coverage of your property with a min amount equal to the amount of your loan. As a homeowner you have the right to shop for your insurance, even when the lender is escrowing the payment

[golo]

That's right,thank you for correct me,yes I meant homeowners insurance.I know I can shop around which I did,but why would the lender require me to insure the house for so much when they're not going to get the full amount from the insurance co? Doesn't make sense.

[DallasLoanGuy]

i dont understand.....

replacement (rebuild) costs is sometimes more than purchase price or appraised value?!?!?!

[golo]

Sometimes? How can just the price of rebuild could be more than the purchase price that includes that land? I don't understand neither....

[DallasLoanGuy]

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@golo wrote:
Sometimes? How can just the price of rebuild could be more than the purchase price that includes that land? I don't understand neither....

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yes, sometimes.

depends on the age of the property and other circumstances i guess.

$150k house =  130k + 20k land

it costs more than 150k to rebuild that 130k house  i bet

[smallfry]

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@DallasLoanGuy wrote:

i dont understand.....

replacement (rebuild) costs is sometimes more than purchase price or appraised value?!?!?!

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My home was apprasied at $200K. The replace to build is $239K.

[bellrod44]

I was told that it's common to insure for more than the appraised value to factor in the cost of removal of the old structure(s) and also the increase in cost of supplies. If this is not what you were looking for, I apologize and I may not have read closely enough.

[DallasLoanGuy]

removal + build = replacement

and, yes, materials have gone way up

[IOBA]

Our lender required that of us too - last year.  Had to have insurance equal to the loan.  (We had put 20% down, so the amount was not equal to the purchase price.)

Well, the insurance company only does coverage in increments of 5k.  So to meet the underwriter's requirement, we had to OVER insure the house.  

We ended up changing our insurance companies within the first year and got the coverage that was better for our situation, not to what the lender wanted.  

It's been my experience that the lender only cares about (after closing) making sure that they are listed on the policy.

So maybe bite the bullet, get the coverage to make WF happy, then change it later.