Comments on: HO6 Insurance Policy???

By: brianm

brianm — Wed, 25 Jan 2012 03:22:23 +0000

I am glad you found the post helpful. I am in the same scenario on my own condo. I find the coverage excessive, but only slightly so. I did a major renovation on my place, and although I am probably covered in excess of what I need, it helps me sleep at night knowing I have no worries. My HO6 costs me about $400 annually, and maybe $50-$100 of it is not needed. But, I don't know for sure, labor can be very expensive, and as I said, it helps me sleep at night. You can make an adjustment after settlement, but think it through carefully.

By: kdk

kdk — Wed, 25 Jan 2012 01:09:16 +0000

Brian – I am in the process of a refi and just found out about this requirement. This posting has been very helpful. We already have HO6 coverage, but are told it is not enough. The required $158,000 of building property insurance seems really high. There is only so much flooring, shelving, light fixtures, etc., that you can put into a 1,300 sq ft condo over and above what the original building plan provides. I spoke to our agent who says that this is the highest requirement they have seen. It would also increase our homeowners insurance by 33%. We still make up the increased cost of insurance with the lower interest rate, but it seems really unnecessary and will definitely try to reduce it after closing.

By: brianm

brianm — Mon, 23 Jan 2012 22:56:03 +0000

Yes, but realize if there is a total loss, by fire for example, you will likely be exposed to some losses.

By: Sal

Sal — Mon, 23 Jan 2012 22:29:41 +0000

Hi Brian

Thanks for getting back to me so fast. Yes I do realize but I have never had a claim in my life of any kind.
I'm just the average Joe, going to my job back an forth so…. Never been in an accident or had any trouble. I think it's a waste of money on my part .

By: brianm

brianm — Mon, 23 Jan 2012 22:23:41 +0000

Hello Sal, yes, I have had people get an HO6 policy to satisfy the lender, only to cancel it later. But realize you are likely leaving yourself under insured if you do so.

By: Sal

Sal — Mon, 23 Jan 2012 22:18:25 +0000

I was wondering if you can get the policy for one year until you have completed the loan and then forget about it, or even after you've signed the loan, cancel the policy. I don't need it, I'm forced to do it because of the new regulations.

Can that be done ??

By: brianm

brianm — Fri, 30 Dec 2011 17:50:48 +0000

Hello Todd, no, these policies are not retroactive. They are effective for all new loans only. So if you purchase a condo, the new HO6 rules apply, and if you refinance an old loan, no matter when it was originated, the new HO6 rules apply.

By: Todd

Todd — Fri, 30 Dec 2011 17:48:11 +0000

Brian, if a mortgage for a condo was originated in 2003 and is owned by Fannie Mae can the Servicer or Fannie Mae now require you obtain an HO-6 policy? It was not required at time of closing in 2003. Is this a retro active policy?

By: brianm

brianm — Fri, 16 Dec 2011 18:55:31 +0000

You are not obligated to maintain the 20% coverage forever, it needs to be in place at settlement. Unless the lender is forcing you to escrow for it, after settlement, you can alter it. It's the same concept as signing loan docs that say you are going to be an owner occupant, but then a few months later a work relocation, change of heart or financial circumstances forces you to rent the place and live elsewhere as your primary residence. However, many people that drop their coverage later are likely under-insured in case of a major loss.

By: Josh

Josh — Fri, 16 Dec 2011 17:46:47 +0000

Brian, you said "you can raise the coverage to get the loan through, and you can opt to reduce it after settlement later". How can you do that? What allows you to reduce it later if you're obligated by the loan documents to insure 20% of the unit's appraised value?