Can a mortgage company take the money I paid toward my monthly home note and use it to pay for insurance that is not escrowed?

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Can a mortgage company take the money I paid toward my monthly home note and use it to pay for insurance that is not escrowed?

I made a payment to my mortgage company for my mobile home payment but received a letter saying I’m 2 months behind when I know I am not. When asked how this is possible they replied they had used the money to pay for insurance premiums after I told them I no longer wanted the insurance and had my own. Can they take my checks that was specifically made out for my mortgage payment (with the account number and payment coupon number clearly on the check) and use it for payment on insurance that is separate from my mobile home payment? I only have a little over a year left on my mortgage.

Asked on April 30, 2011 under Business Law, Alabama

Answers:

M.T.G., Member, New York Bar / FreeAdvice Contributing Attorney

Answered 10 years ago | Contributor

They should not be applying the mortgage payment to insurance but what they can do is get insurance for you and add it to the mortgage payment every month.  It still makes you liable, unfortunately, because you technically have not paid the full amount.  But if you have your own insurance showing them proof is all you would have needed to do.  Get something from your insurance carrier showing that the mobile home is insured and send it to the mortgage company.  Tell them that you want them to stop the insurance they have and to credit you back the mortgage payments.  Tell them that you make them aware that the insurance was in place prior to there applying the mortgage payments elsewhere and that this is improper.  The mortgage has in it a clause that says the property has to be insured.  I am sure of it.  But you do not have to use their insurance company.  Good luck.


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