I have a few clarifications I need on the legality of this FHA loan. In this clause it states that all insurance claim check are to be written to the lienholder and not the lienholder and borrower. I have yet to talk to anyone who has a mortgage that there loan doesn't have them listed on insurance claims along with the mortgage company.
The insurance company we have wrote the check payable to 1. Me 2. My wife, 3. the mortgage company. This went against the wy the loan reads. This mortgage company didn't make any issue of it being written this way.
Question: I endorsed the check as did my wife and sent it to the loss draft department where it has been since I sent it to them over a month ago.
If I am paying the insurance premiums what right does the mortgage company have to demand that they be the only payee on insurance claims?
Below is the exact wording under insurance copied and pasted from the loan document we signed.
Question: Other than this section I cannot find any other documents that refer to how insurance claims are to be processed. Is there somewhere I might be overlooking?
4. Fire, Flood and Other Hazard Insurance.
Borrower shall insure all improvements on the
Property, whether now in existence or subsequently erected, against any hazards, casualties, and
contingencies, including fire, for which Lender requires insurance. This insurance shall be maintained in the
amounts and for the periods that Lender requires. Borrower shall also insure all improvements on the
Property, whether now in existence or subsequently erected, against loss by floods to the extent required by
the Secretary. All insurance shall be carried with companies approved by Lender. The insurance policies and
any renewals shall be held by Lender and shall include loss payable clauses in favor of, and in a form
acceptable to, Lender.
In the event of loss, Borrower shall give Lender immediate notice by mail. Lender may make proof
of loss if not made promptly by Borrower. Each insurance company concerned is hereby authorized and
directed to make payment for such loss directly to Lender, instead of to Borrower and to Lender jointly. All
or any part of the insurance proceeds may be applied by Lender, at its option, either (a) to the reduction of the
indebtedness under the Note and this Security Instrument, first to any delinquent amounts applied in the order
in Paragraph 3, and then to prepayment of principal, or (b) to the restoration or repair of the damaged
Property. Any application of the proceeds to the principal shall not extend or postpone the due date of the
monthly payments which are referred to in Paragraph 2, or change the amount of such payments. Any excess
insurance proceeds over an amount required to pay all outstanding indebtedness under the Note and this
Security Instrument shall be paid to the entity legally entitled thereto.
In the event of foreclosure of this Security Instrument or other transfer of title to the Property that
extinguishes the indebtedness, all right, title and interest of Borrower in and to insurance policies in force
shall pass to the purchaser
Lastly - What exactly is a restricted escrow account and why are they set up. My understanding is that the escrow company is a third party who holds these monies to make sure that both sides are treated fairly. The escrow company is drawing interest off of these funds while they are sitting in their accounts. Do I have the right to ask for whatever interest is earned from the funds?