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is it common practice for a reverse mortgage company to ask for a change mortgagee name on my home policy?

By Jean on 01.17.2019

Hi Jean,

Not only is that common, that is a requirement you will get from every new lender of any kind of loan.  A lender must be added as an additional insured (in addition to the borrower) on the policy to protect their interest in the home.  This is done so that homeowners cannot choose to take any insurance funds and leave needed repairs left undone after damage is sustained.

This is true for all loans, both forward and reverse.  Typically, your processor will contact the insurance company (with your permission) and give them an anticipated closing date and request that the change be effective on that date.  It’s always a little bit of a guessing game. 

The new lender will not issue funds unless the insurance covers them, and the processor does not want the old lender to become concerned that the coverage has been changed too soon while the old loan remains outstanding.  If the processor requested the change too soon, the existing lender would receive notice of insurance cancellation/change and they could become concerned. 

The bottom line is that you can direct your lender to wait and not make the change until the day the loan is scheduled to close, but remember, your new lender will not close the loan without a valid policy in effect that names them as the Mortgagee.  If you try to limit it to the exact day of anticipated close and the insurance company drags their feet at that point, you could delay your new loan closing.  Also, if the loan is ready to close before that anticipated date, you may not be able to close only because the insurance is not yet in effect if you try to pinpoint the date too closely.

 

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