Homeowner�s Insurance Cancellation by Mortgage Lender �PERPLEXED!

[HakunaMatata]

In the months leading up to the Sheriff Sale, I was contacted by my lender (HSBC) and asked to verify my current homeowner's insurance. My insurance agent submitted documentation of my existing policy to my lender. My house went to Sheriff Sale in mid-June. I'm in Michigan and we have a six month redemption period.

I received an odd bill from my homeowner's insurance company this past week (I have never had an escrow account and my policy has never lapsed). I contacted my agent to inquire and, after considerable exploration, he discovered my homeowner's insurance had been cancelled by my mortgage lender one month following the Sheriff Sale.

Utterly perplexed, I immediately attempted to better understand this situation. I embarked upon a two hour call bouncing program with HSBC and was left with very little information. One representative identified my house as an "active REO", stated structural insurance had been obtained through HSBC, and claimed to have NEVER witnessed a similar cancellation scenario.

In sum, my current homeowner's policy was cancelled by my lender one month FOLLOWING the Sheriff Sale without my permission and without notification. I have been unknowingly uninsured (liability/contents). HSBC purchased my house at the Sheriff Sale and, as far as I understand, my deed doesn't become operative until the redemption period expires in December.

Does HSBC have the power to authorize cancellation of my insurance policy without formal notice? Are they legally permitted to potentially jeopardize my financial future (liability) and lack regard for the value of my personal possessions?

[TexasTyke]

HSBC tried to do the same thing to me. I filed bankruptcy and 16 days later, I received a notice from my insurance company that HSBC had advised my home had been sold in foreclosure and requested a refund of my unearned premiums. Two days later, I received from their attorneys a Motion for Relief from Automatic Stay. I checked with my attorney and he advised that he had heard of banks cancelling the insurance in a bankruptcy since an ex-parte motion can be filed to lift the stay if your home is not covered by insurance and the motion granted without a hearing almost immediately. Fortunately I was able to convince my insurance company to reinstate immediately and get my premiums back. I've checked around and it appears this is common practice for HSBC. Very dirty!!

[HakunaMatata]

HSBC tried to do the same thing to me. I filed bankruptcy and 16 days later, I received a notice from my insurance company that HSBC had advised my home had been sold in foreclosure and requested a refund of my unearned premiums. Two days later, I received from their attorneys a Motion for Relief from Automatic Stay. I checked with my attorney and he advised that he had heard of banks cancelling the insurance in a bankruptcy since an ex-parte motion can be filed to lift the stay if your home is not covered by insurance and the motion granted without a hearing almost immediately. Fortunately I was able to convince my insurance company to reinstate immediately and get my premiums back. I've checked around and it appears this is common practice for HSBC. Very dirty!!

Interesting chain of events. My situation is a tad different considering my BK commenced in September/closed in January (HSBC never attempted to lift the Automatic Stay), the Sheriff's Sale was in June, and my insurance was cancelled by HSBC in July.

Understandably, structural insurance cannot be held by two different parties and two different insurance companies on a single property. I simply don't understand how a full policy cancellation (structural, liability, contents) can be made without immediate notification and/or consent. While HSBC purchased my home from the Sheriff's Sale in June, the deed doesn't become operative until December. Plus, the house was purchased in June and the insurance wasn't cancelled until July.

If cancelling policies is so easy, perhaps I should contact HSBC's insurance company and cancel all of their policies?!!