Legal Question in Real Estate Law in Massachusetts
I am in Massachusetts and i own a condo (2 unit assoc.) that is covered by a master insurance policy. This policy was fine for the orination of the loan and the past two years of ownership. My lender is now requiring me to list them as the beneficiary of the policy in case of. My insurance company will not make this change to the policy. My lender now wants to add $376 to my bill each month. Can my lender require me to get an additional policy? A friend of mine suggested that this may constitute a violation of Massachusetts law 93A since we entered into the contract with the existing insurance policy and it was acceptable for 2 years of the loan.
2 Answers from Attorneys
Your friend has obviously never read a mortgage. Unless the lender is named as an additional payee or mortgagee, it has the right to purchase its own insurance at your expense.
See paragraph 5 of your standard form Fannie Mae mortgage (page 7 of 16) and review the contractual obligation to name them as mortgagee or additional payee, as well as (page 6 of 16) their right to purchase insurance themselves and charge you for the premium if you do not have them named as an insured. In addition, you likely signed a compliance agreement as part of the loan agreement in which you affirmatively represented that as a condition of being granted the loan, you would execute any documents that need to be amended
The insurance agent is wrong. It should issue a binder naming the lender as an additional insured. An experienced insurance agent should be able to assist you with this, if your insurance agent does not know how to do this, then get a new one.
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