Legal Question in Real Estate Law in California

If you are sure that there is no mention made of that type of insurance, including something about proper insurance coverage, then technically you do not have to comply. Is there really any need for this type of additional insurance? Ask the lender where in the loan contract it states you are required to have this additional insurance and why were you not told, and ask why it is needed and why you should have to pay for it if not mentioned in the original contract?

You don't want to be in default from the get-go, and many loans allow the lender to buy coverage and bill you for it if you don't provide what's required. Therefore, it's very important to be sure there's no provision in your documentation requiring this coverage at your expense, by the name HO-6 or any other name.

I'm also wondering about the names given the players here - lender and investor......is it possible their true roles are broker and lender rather than lender and investor? Which one are you in comtract with? That's the one who can call the shots - up until the deal closes.

I agree with Mr. Shers that you should politely but firmly insist on being shown that the already-signed documentation requires this insurance, and that you are one who is supposed to obtain and pay for it. Once a contract is signed, a party has no right to demand more than the contract gives him.

I write separately because Mr. Whipple brings up an interesting point. Many deeds of trust contain a dragnet, or Anaconda clause, which makes the deed of trust security for additional advances made by a lender. (It's in the fine print.) Theoretically, as Mr. Whipple points out, the lender could purchase the insurance, and then tack those costs onto your loan, arguing that the dragnet clause covers that advance for the purpose of insurance.

I recall reading a case recently that was similar to this situation. I am struggling right now to remember the case, and the holding, but I remember it being adverse to the lender and the dragnet clause was strictly construed against the lender. I will update this post when I find it.