Distressed Short Sales and Foreclosures Not a Concern for Homeowner- By: John Cutts
When homeowners appear in news headlines, the reasons often have something to do with foreclosures and distressed short sales. However, this is not the case for Patrick Rodgers, a homeowner in Philadelphia, Pennsylvania. Rodgers has filed a case against Wells Fargo over insurance premium questions.
Rodgers' property is not one of the many Philadelphia distressed homes. The local homeowner does not have a problem paying his mortgage since he is not unemployed. However, his insurance firm told him almost two years ago that his homeowners' premium will likely double because his mortgage bank, Wells Fargo, is asking for insurance equivalent to his residence's full replacement value. The coverage was estimated to be worth around $1 million.
According to insurance experts, majority of lenders require homeowners to insure their properties for an amount equal to their market value and not based on how much would be spent if the properties are rebuilt. Because of the high number of distressed homes in Pennsylvania, the market value of houses are likely to be lower than the amount that will be required to replace or rebuild them.
According to local reports, Rodgers will be paying more than the market value of his home if he renews his insurance policy. The values of residential dwellings in the city as well as the rest of the state have declined considerably in the past few years due to foreclosures and distressed short sales. Rodgers reportedly paid $180,000 for the house.
Some mortgage industry observers have stated that people can find distressed homes for sale in Rodgers' neighborhood that are probably worth a third of the insurance policy Wells Fargo is asking for. Rodgers reportedly sent letters to Wells Fargo, asking for further explanation, but when he did not receive a reply, he sued the bank under the Real Estate Settlement Procedures Act, which requires lenders to reply to homeowners' queries.
The homeowner won a settlement, and when Wells Fargo failed to pay, Rodgers sought the help of the Sheriff, which resulted in the local office of the bank getting scheduled for a Sheriff's Sale. The office property did not end up as one of the area's distressed short sales or foreclosed properties and Rodgers was able to get his settlement fees.
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John Cutts has been educated in the finer points of the foreclosure market over 5 years.