Dear Harry: I bought my home in 1999. The bank would not approve a mortgage unless I had flood insurance. I purchased it for the $56,000 cost of the home. A few years later, the mortgage was sold by my bank, and there were no problems until 2009. At that time, the servicing company insisted that I up the coverage on all my insurance to $113,000. That was the value they said the house was worth. Yesterday, I got a letter saying that a further hike was needed. They insist that houses in my area are increasing in value despite the fact that they are in a flood zone and that real estate is generally declining in value elsewhere. My monthly payment has already gone up by $142 since I bought the house. Is there a way of checking these new values? Also, how can I get rid of the escrow? When I got the mortgage, they wanted to charge me .25 percent extra interest to avoid it. How about now? Something's not right.
What Harry says: I don't have good news for you. Your mortgage agreement gives the lender the right to make sure there is sufficient insurance. If you want to contest its valuation, you'll need a professional appraisal of your own. Remember that you are normally required to have only enough insurance to cover the mortgage, but that's not enough to protect your interest. An appraisal can cost quite a bit depending on the size of the home. As to the escrow: It is very rare for a mortgage lender to allow a borrower to pay the taxes and insurance on a home once the terms are set. There's no harm in asking, however, but don't get your hopes too high.