Home Insurance Michigan Question.

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Question #1 - Can a mortgage holder (lender) restrict, control or otherwise demand that you get home insurance through a specific home insurance company?

Question #2 with background - My friend just bough a residential home in Greenville, MI. She had all the appropriate assessments, inspections, evaluations, appraisals, tests, ect done prior to closing and ultimate purchase of the home and property with financing. All evaluations and inspections of the home showed no significant issues. The home actually had 2 inspections for reasons I am unaware of. Question: the home insurance company, that the mortgage lender states is the only insurance company they will allow her to use, demands that she replace her rough or they will not cover/charge a rediculas amount. The stated reason is in reference to 6 shingles that have some organic growth (not mold or anything harmful not sure what but some moss or something similar I believe). They said replacement of the area was not possible and only full replacement of the rough would adaquitly remedy the situation. A licensed contractor came out and inspected the rough stating everything is fine and the rough has at least 5 years of life if not more before replacement is warranted. The insurance company dismissed this information and continued with their original statement of complete replacement. There are no leaks in any portion of the rough. Does any of this sound fishy? If this small portion of the rough was of any concern should it have been brought to the attention of the home buyer during all the inspections and evaluations? Any advice on the matter or directions to some that could offer some advice would be greatly appreciated. Thanks for your time.

 

[adjusterjack]

Question #1 - Can a mortgage holder (lender) restrict, control or otherwise demand that you get home insurance through a specific home insurance company?

Obviously it CAN do it if it DID do it. Based on the story (which is written in the past tense) your friend BOUGHT the house, GOT the loan, and ACCEPTED the lender's mandate about what insurance company to use.

Clear that up for me.

Did she already BUY the policy from that homeowner's insurance company?

If yes, what is the exact effective date of the policy?

 

[InsCommentary]

I don't know about Michigan, but it's illegal in my state. Check Michigan's Fair Trade Practices law and see if it has a provision for lenders. Our law also makes it illegal for a lender to request more coverage than the replacement cost of the dwelling. This is what the law says in TN about requiring a specific insurance company:

56-8-106. Lenders of money - Extenders of credit.

(a) No person who lends money or extends credit may:

(1) Require, as a condition precedent to the lending of money or extension of credit, or any renewal thereof, that the person to whom such money or credit is extended or whose obligation the creditor is to acquire or finance, negotiate any policy or contract of insurance or renewal thereof through a particular insurer or group of insurers or agent or broker or group of agents or brokers;

 

[VolAgent]

I don't know about Michigan, but it's illegal in my state. Check Michigan's Fair Trade Practices law and see if it has a provision for lenders. Our law also makes it illegal for a lender to request more coverage than the replacement cost of the dwelling. This is what the law says in TN about requiring a specific insurance company:

56-8-106. Lenders of money - Extenders of credit.

(a) No person who lends money or extends credit may:

(1) Require, as a condition precedent to the lending of money or extension of credit, or any renewal thereof, that the person to whom such money or credit is extended or whose obligation the creditor is to acquire or finance, negotiate any policy or contract of insurance or renewal thereof through a particular insurer or group of insurers or agent or broker or group of agents or brokers;

I do believe there is a Federal rule as well. I can't find it off hand.

As to the fundamental question. If something is growing on the roof, then it is likely it has outlived it usefulness. Shingles are treated to keep moss from growing on them, if moss is growing then they are at the end of their life.

While it does vary from state, homeowner's policies do include a provision allowing the company to cancel within a certain period of time. 60 days in Tennessee.

Basically, the insurance company feels the roof is bad and they don't want to be stuck paying for one or for damages caused by a bad roof in the near future. Depending upon Michigan laws, they would be well within their rights to cancel the policy if the roof if not replaced. As to why it was not noticed during the inspection, that is a good question. Did the buyer have a home inspection done, or was there simply an appraisal? An inspector should have found if the roof was in bad condition. An appraiser isn't looking at that, but merely what is the home worth based upon the condition they can see and similar homes in the area.

 

[adjusterjack]

Basically, the insurance company feels the roof is bad and they don't want to be stuck paying for one or for damages caused by a bad roof in the near future.

That's right.

Even a roof with 5 years left on its useful life is deteriorated enough so that the next good windstorm will blow off enough shingles so that the home owner will want the insurance to replace the whole roof and will be upset when the insurance company denies the claim due to wear and tear.