Wells Fargo Takes Over Policy, Decides House On Hill Is On A Flood Plain, Automatically Assesses And Withdraws Money For Flood Insurance

A reader asks:

    I’m looking for some help for my kids. My daughter and son-in-law bought a house a bit over a year ago that sits up on a hillside, approximately 50′ higher than the surrounding area. At some point Wells Fargo bought their paper and then arbitrarily decided they were in a flood plain. Without contacting them, they sold them a flood policy for $1,000 and removed that amount from their escrow account, resulting in a negative balance. To make this up so their homeowner’s and taxes were paid promptly required an additional $200 a month…

The kids are trying to get the flood policy through the same insurance company as their homeowner’s policy at a substantial amount less than Wells Fargo charged them (about 450 annually I believe). The insurance company asked for an elevation certificate and stated that there should be a copy of that in their mortgage paperwork, insinuating that it is required to write flood insurance, or is used as proof of a requirement for flood insurance. There is nothing in their copy of the mortgage paperwork. They called Wells Fargo and requested a copy of that certificate to provide the insurance company and Wells Fargo has nothing. We have contacted the city planner for their area and he is currently looking for any information they may already have on that area. However he did explain that if the city hasn’t surveyed that area the kids might have to hire someone to do the survey themselves and that would probably be another 300 bucks.

I don’t know about flood insurance requirements and can’t find anyone to give me a straight answer. I’ve been reading consumerist for some time now and thought I might throw this out there to see if anyone could offer advice. Our concerns are:

1. Wells Fargo buying the paper and charging $1k for a flood policy without any notification. Flood insurance was not required for the mortgage.
2. Their lack of any evidence to support this house being in a flood plain.
3. What action to take if Wells Fargo is out of their minds and just took $1000 from these kids who are just starting out. That is a lot of money to them with a 2 year old and newborn.

Any advice you and/or your reader’s might offer would be greatly appreciated.

Thanks.

Brett S.

That does sound rather unfair. Any advice or suggestions for Brett’s kids? — BEN POPKEN

(Photo: Getty Images)

Comments

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  1. mantari says:

    So is Wells Fargo saying:

    a] Your house is in a flood plain

    or

    b] Your require flood insurance because your current policy does not cover water damage?

    (Of course, if you don’t know, please, ask.)

  2. tyr264 says:

    This doesn’t seem right to me either. As a property appraiser, I’m required to investigate if the property I’m appraising is in a flood zone, and to do so I use a flood map program that is the industry standard. I’d ask Wells Fargo to support the claim by showing you the flood map, and telling you what flood zone the house is in. First check the free flood zone map service thru FEMA at this website; http://msc.fema.gov/webapp/wcs/stores/servlet/FemaWelcomeV
    If you need further info, post a request here, and I can run the address thru the third party flood map software I use in my work for you.

  3. GreatMoose says:

    I don’t know for certain about flood insurance requirements, but I DO know that an insurance company (or any company, for that matter) can’t just raid your escrow fund without some kind of notification. They don NOT have to get permission to do it, but they DO have to let you know that they will be doing it, and they DO have to let you have the chance to pay the bill (or difference) outright. This seems to be a really odd story.

  4. srhbks says:

    Consider checking out the FEMA site- they offer floodmaps for free online, or you can order them in hard copy for $5. You may be able to find the map for your daughter there: msc.fema.gov

  5. royceguy says:

    The FEMA site is the way to check. If Wells Fargo tries to pull a “it was just designated as such” trick, know that re-zoning for a flood zone is a process that takes years, and is generally fought by local governments. (It’s going on in my town now.) Once an area is zoned as a flood zone, flood insurance is more expensive than before. (Generally equals homeowner’s insurance in my limited experience.) HOWEVER, if you get flood insurance before the designation takes effect, it is cheaper and does NOT go up once the zoning changes. You should NOT have to hire a contractor to “prove” you’re not in a flood zone.

    I also seem to remember that flood insurance is a federally sponsored program and it sounds like WF is using something else.

    Bottom line is that I think you’re being scammed. Check your loan docs carefully; you’re impound account authorization may allow them to deduct neccesary expenses, but probably has some sort of notification process.

    Demand your money back, escalating as this site recommends. When that doesn’t work, file a claim in small claims court.

    Good luck, I can’t stand Wells Fargo.

  6. veterandem says:

    Try the County Land Use Department (or it’s equivalent where the kids live), as they will have more detailed information as to whether you are in a flood plain or not (and those will typically be based on the FEMA maps mentioned in another comment). Also most county websites have your platt (site map), deed and any other data on your home available for download or printing (this is a double-edged sword). My experience with city planners is, shall we say, not so good. Good luck!

  7. guymandude says:

    Talk to a lawyer. Mention the word “conversion”.

    conversion
    n. a civil wrong (tort) in which one converts another’s property to his/her own use, which is a fancy way of saying “steals.” Conversion includes treating another’s goods as one’s own, holding onto such property which accidentally comes into the convertor’s (taker’s) hands, or purposely giving the impression the assets belong to him/her. This gives the true owner the right to sue for his/her own property or the value and loss of use of it, as well as going to law enforcement authorities since conversion usually includes the crime of theft.

  8. erebus says:

    Do get the FEMA map. Same thing happened to me, and the Mtg. company backed down immediately when I gave them the map number. (Assuming the map shows their house not in a flood zone, which it sounds like it isn’t.)

  9. critical_matt says:

    Well, you are either A) in a flood plain or B) not in a flood plain. There isn’t any fuzzy area here. Contact the local gov’t or hit up fema. They will be able to tell you. The elevation of the house isn’t going to mean a whole lot if you’re in a designated flood plain. You can actually not be near any water and be in a flood plain if there are overrun areas for city sewers/resevoirs near the house.

    As for the contact a lawyer-conversion thingy. The lender actually owns the house til you pay off the note. I’m pretty sure their original mortgage had a clause that it could be purchased by another company. The lender requires you to carry insurance, including the flood insurance if needed. If you lapse or get cancelled by your chosen carrier, the lender has the right to force place coverage on your property, and you’ll pay the higher premium that forced place coverage entails.

    Anyway, this is all moot. Get proof you are or are not in a flood plain and take it to the lender.

  10. critical_matt says:

    oops, forgot to also mention that if you are in a flood plain, you get your own policy for it. Show it to the lender and it will take the place of the force placed coverage.

  11. thunderstruck says:

    Unfortunately, I can’t offer anything meaningful to fix the problem, but I will say that your daughter and son-in-law are lucky to have your help and support!

  12. msthe8r says:

    It does seem like an odd story…unless you’ve dealt with Wells Fargo.
    When they claimed to have paid my taxes in an amount 2/3 again what I owed, it took contacting the Office of the Comptroller of the Currency to get them to fix their error. In the meantime, my escrow was raided, causing an increase in my monthly payment of $200 a month.
    Then their was the time that they applied my payment to someone else’s account. Took six months to fix that one, and they still haven’t gotten rid of some of the late charges. My favorite part of that one was their demand for a cancelled check, when they deposit checks electronically. Again, the OCC had to step in.
    If you are able to get the proof that the house is not located in a flood plain, copy everything that you have to the OCC. Wells Fargo will often ignore anything less…including a lawyer.
    I FedEx my monthly payment to Wells Fargo just so I’ll have proof of delivery. Every single month. Otherwise they hold the check until a late fee kicks in.

  13. RaymondoMagnifico says:

    Wells Fargo tried the same thing with my house (also on a hill)a couple of years ago.
    We contacted them and the told us the feds had redrawn flood maps. We asked to see the new map and they responded by saying they had made a mistake and dropped the requirement.
    A more suspiscious sort of person would have smelled a scam–wonder how many people just pony up for the insurance.

  14. squikysquiken says:

    @critical_matt: No, you own the house, and you put it as a collateral on your loan. This is not like a car loan where the bank keeps the title (and therefore has ownership). I have the deed to my house and if I stop paying, the lender will need to follow foreclosure proceedings to get the house. I don’t have the title to my car, the lender can just pick up the car if I stop paying.

  15. Dan_25 says:

    flood insurance is required for ALL property secured loans by wells fargo.

  16. spike1165 says:

    Been there, done that…

    Going the FEMA route is your best option. You would need to request a flood map of your location from them. If the map shows your home to be above the flood plane, you can provide a copy to your mortgage company as evidence that their records are wrong.

    The problem is that these flood maps are often several years old (the last one showed my home to be in the middle of a creek).

    If you are in this situation, you will need to request a Letter of Map Amendment (LOMA) from FEMA. The only tough part with this process is that you will need to hire a surveyor to come out to your property and document its elevation. This process cost me about $600.

    The good news is that if you find that your home is not in a flood plane, your mortgage company is required to refund 100 percent of the premiums that they have taken out of your escrow.

    In my case, I dumped my mortgage company (USAA) after they refused to refund the cost of my surveyor fee, even though their initial assessment (which they claimed to be in error) showed my property to be above the flood plane.

  17. ebarch says:

    The flood plain issue may not be as clear as you think depending on the area. Some local areas have taken matters into their own hand and surveyed their towns to create local flood plain maps that do not match FEMA maps. Many FEMA maps were drawn long before today’s more technologically advanced survey methods were available. So some towns require homeowners to follow town maps.

    What this means is that you need to get both a FEMA map and a town map. Since this is an issue at all I’m assuming this is a costal town or on a lake or river so your town should have a costal or water management office or a wetlands office. If you can’t figure it out on your towns website call the building department or town planning office. They should know who to direct you to.

    Once you have both maps it will be more clear to you if you’re in a flood zone. If neither map shows you in a flood zone take that proof to WF. If there is conflicting information contact your town planning office and/or speak to neighbors who appear to be in your flood zone. If both maps show you in a flood zone then follow the advice of others in these comments about who to get insurance from and how to handle WF. Keep in mind that there are different types of flood zones that may require different levels of insurance coverage. Best of luck.

  18. Sudonum says:

    A good place to start is to get a previous survey. Go to the Clerk of Courts for the county the house is located in. They will have plats on file showing the elevation and if the area was designated as a flood zone at that time. As stated previously, these designations can change over time. After you have a copy of that plat, and it verifys you are not in a flood zone, go to FEMA to see if and when they made any changes in your area.

    I had a situation with a townhouse I purchased in FL. The previous homeowner was not required to carry flood insurance. However my lender insisted that flood insurance be carried. I had been told by my insurance agent that FEMA had recently changed the maps in that area. I paid the $300 bucks to have a survey company issue a “Flood Certificate”. My unit was not in the flood zone. That was money well spent.

  19. Another thing to check is the plat, which is typically listed somewhere in your mortgage docs, somewhere on your escrow docs, somewhere on your property tax bills — and then, of course, on the deed and whatnot.

    It’s alarmingly common for a few numbers to get transposed in a plat and for someone to pay property taxes on the wrong house for 20 years.

    So I’d first make sure the numbers match in all applicable places and some doofus didn’t enter your platting wrong when your mortgage was sold to Wells Fargo.

    (Then I’d call the lawyer and say “conversion!”)

  20. Libelous1 says:

    Opening comment: this post is based on my own personal experience with eliminating requirement for flood insurance.

    1. see comments above re flood plain. I agree that you are either in or out of the flood plain.

    2. If you are in, then you should have been required to obtain flood insurance when you first obtained the mortgage. If you are not in, you cannot be required to purchase it. period. If you are in, but the initial mortgage company screwed up and didn’t make you purchase, I do not know whether they can force you to get it later.

    3. EVEN IF YOU ARE IN, you can get a “letter amendment” to exclude you from the flood plain and thereby, avoid the requirement to obtain flood insurnace. I know this personally, because, I, like you, was on “a hill” but technically in FEMA flood plain maps. The federal maps are drawn at a very rough scale (as opposed to detailed scale) and therefore pull in many elevated areas that have zero risk of ever flooding.

    4. In my situation, i was forced to buy a year’s flood insurance policy to get the mortgage. but at that time I put into motion the effort to get a letter amendment, noting that I was not subject to flooding because of my elevation, etc. It didn’t cost me that much, $750.00 from a registered PE and land surveyor (compare with $1100 per year for flood insurance) who took care of all the paperwork. It took just over a year and a half — back and forth between surveyor and FEMA, but I ultimately received the letter amendment.

    5. By the time I got the amendment, I had been forced to pay (via escrow) a second year’s premium. However, I got a refund of both the first year and second year’s premium as a result of the letter amendment. I was told they would refund the past two years’, but not three years, of premiums, which worked out well for me. And the letter ended any further obligation to buy flood insurance.

    I hope this helps.

  21. Frank Grimes says:

    I’ve had the same thing happen to me twice. You CAN live in a flood plain and still get flood insurance. What Wells Fargo needs and this is the ONLY way that this can get cleared up is an Elevation Certificate. It’s a standardized document created by FEMA that most likely the builder will have a copy of. In my case I had one based on the design of the home but ended up needing one with an actual reading. Once you get that they tell you in plain language on that doc. where you are in the flood plain. Also, the “forced” flood insurance that they levy on me cost $1200 but my policy after my elevation cert was only about $500. They are required to carry it but WF gave them a blanket policy because they don’t know if you are within the 100 or 500 year zone. Also, just because it appears that they are that high up the FEMA maps hold the key. Here is the link to the form from FEMA:

    http://www.fema.gov/business/nfip/elvinst.shtm

    This really needs to be filled out by the surveyor (mine cost $325 in Houston) but like I said, if its a new build the builder would have done one (mine did provide me with a copy but he’s much nicer than most builders) I can tell you that Wells Fargo, like any bank, won’t do a thing without this. In both cases though I was able to get back any extra payments that were tacked on. One of the reasons why I don’t escrow now, why let those jakels take your money and put it to work for them.

  22. webothlikesoup says:

    OK, I’ve been through this with Wells Fargo. WF deducted about $1,200 from our bank account around Dec. 23, 2005. Christmas kind of sucked that year.

    Here’s what you need to know . . . WF outsources it’s flood policy handling to another party. The contractor is horrible. I hate them. A lot. We live in a flood plain, and our condo building has flood insurance. I sent in the documentation in response to their request . . . but the contractor never processed the request in time, so they force placed us with insurance.

    WF has no clue into what the contractor is doing. WF representatives can’t see into their systems (at least not in 2005, and something tells me they haven’t done a lot of system upgrades).

    Here’s what got me through . . ..

    1. Do not, under any circumstances, let customer service transfer you to the flood policy department. It’s like asking Satan to let you out of Hades. Satan ain’t interested in your hopes and dreams and $1,000 for your new baby. He hates you and likes your pain.

    2. Tell the CSR you know this isn’t their fault, and they can’t control what’s happening, but you need someone to act as an advocate.

    3. Call your local WF Home Mortgage Lending office (not the customer service line). Make best friends with them fast. I LOVE my WF mortgage lender, and she got her hands dirty for me. Tell the WF lender that you are interested in using them in the future, but that’s very dependent on how WF is treating you now. (See recent Consumerist posts on increased loyalty when companies solve stupid-ass problems). Your lending office may not be able to do much, but it’s another person making noise for you.

    4. I would not use threats of a lawsuit with your CSR advocate. They are trained to go into defense mode when you do that, and they will shut down. Not that you can’t talk with them about all the different ways you could use to get your money back.

    5. You cannot fix this problem by yourself. You need WF people to help you. This is a systematic problem, and you can’t fix it by using the system (see above, #1 – Satan).

    We got our money back within 10 days. That’s far too long, I know. But with the holidays thrown in there for us, and businesses closed, that’s what took so long.

    With all that said, I will continue to use WF, simply because of how much I love my lender. In fact, I’m working on a new mortgage with her right now. I think a lot of it is because of how willing she was to help me fix this.

  23. JimmieDimmick says:

    Know that the elevation of the entire property matters, in that if the house is on a hill, but a tiny corner of the property exists in a flood plain, the entire property is coded as located in a flood zone. Usually though, in these circumstances, if you file a Letter Of Map Amendment (LOMA) with FEMA, and pay the fee to have a new survey done, you can have the Map Amendeded to show your property not located in a flood zone. Wells Fargo will have a copy of the Flood Cert, they would have to have viewed this to make the determination. Don’t forget that it is FEMA that has placed this in a flood zone, not Wells Fargo, therefore the headline is a bit misleading.

    The reason for the Lender Placed Policy being so extravagant, is that their Insurance Co. is insuring this property ‘sight unseen’ and for a period of time that exists in the past. As we all know, insurance premiums are based on risk, and this is about as risky as it can get.

  24. jmuskratt says:

    After having been through Katrina, I have learned more about BFE than I ever thought I would. My addition to this little discussion is this: Flood insurance rates are set nationally. An A8 in Montana is the same as an A8 in New Orleans. WF’s “rate” shouldn’t be more than 10% than anyone else’s. If so, they’re screwing you. The higher above BFE your first “living floor” is, the lower the NFIP premium.

  25. molasses says:

    Tell them to send an agent to do a driveby and they can SEE your house and SEE that it is on top of a hill. My property, and some of my neighbors, back on to a pond – so we all have “water on our property” – but we are waaaaaay up on a hill and the pond is waaaaaay down there. One of my neighbor’s insurance companies gave them a hassle, but once the insurance company’s agent drove past it, it was so obvious that they said “Oh. Sorry about that,” and dropped all the flood plain garbage.

  26. neost says:

    Thanks for the information guys. The FEMA public maps are not up to date and the street they live on is NOT reflected, however based on that map they are in an X zone, near a high risk area that a bayou runs through.

    We called the City Planning Office and talked to the guy that handles the flood surveys and they have not surveyed this area.

    So at this point, based on your comments and other information I have gathered we will be hiring a surveyor for about 300 bucks to save 1k a year from WF or 450 annually with another insurance company.

    There is still the fact that WF took money out of their escrow w/out a chance for them to dispute this. Doubt we’ll ever see that money again, even after we prove the house is not in a flood plain.

    Thanks again for all your advice, it has been most helpful.

    Brett S.

  27. John Stracke says:

    A couple of years back, I spotted a bank billboard with the slogan, “We never forget it’s your money”, which struck me as the absolute minimum a bank could promise, comparable to a hospital saying, “We never rip out your kidneys and sell them on eBay”. Clearly, Wells Fargo doesn’t meet this minimum.

  28. bnb614 says:

    I would contact the county engineer. they will most certainly (i would assume) have elevation maps of the entire county and can tell you the elevation of your house, and the elevation of the nearest body of water, if you are near a flood plain.

    At the same time, I would hire an attorney. The onus should be on Wells Fargo to prove what they did is accurate and legal. It shouldn’t be your responsibility to spend all your time collecting data they should have looked at before they did this.

    A letter from an attorney threatening legal action seems to free companies up to being more helpful.

  29. bnb614 says:

    “radio is so dead, touring’s slow for her as well.”

    God forbid the musicians might have to go out on the road and actually try to earn a long-term fanbase. Building a fanbase tends to filter out the talented from the talentless…..plus most of the radio hits these days come from entertainers who sing other peoples’ songs, not musicians.

    The #1 reason you don’t need a major label anymore is, with MySpace and other sites like that on the internet you can market and sell your songs yourself, build a fan base, and do everything the major label will do for you only if you stay popular.

  30. bnb614 says:

    ha, disregard that comment. too many gawker sites open at once. that was meant for Idolator. It’s been a long day.

  31. mortgageman says:

    I’ve worked as a mortgage broker or on the mortgage side of banking for the last five years, and while living in Florida, so I know a good bit about your problem:

    WF didn’t do this just to be mean. They checked the FEMA’s flood zone on you, and you turned up in a problem area. And just because you’re on a hill doesn’t mean you’re safe. If you’re marked as needing insurance, it’s because there’s a likelihood of once in a hundred years (literally) your home flooding. And lots of people used to get by without it, even if they were marked in the zone, because mortgage companies were a lot more lax about it until a few years ago.

    First thing to do is request a copy of the appraisal, survey, flood certificate, or whatever it was that made them decide you were in a flood zone. If that comes up saying they did their paperwork properly, the next thing to do is check the flood zone map itself. Lots of time your LAND will be in a flood zone but your HOME won’t.

    If your home is in a zone, well, you can contact FEMA and try and get them to go out and re-evaluate it. Lots of times its the local property appraiser who has this job, and if you bug them enough they’ll go out their and do it for ya.

    Be as quick about this as you can. If WF was right to force place flood insurance on you (and they can do it without telling you, there’s a clause about it in every mortgage known to man) then the insurance will be pro-rated when you cancel. And sometimes the way stuff is pro-rated, especially by force-placed insurance companies, is very uneven (it uses a version of the rule of 78s to give your money back, which basically means you get very little cash back and can’t do squat about it). So get on it, and good luck!

  32. loueloui says:

    Wow, I’m really surprised. Wells Fargo bought my mortgage, and I couldn’t be happier. I’ve called them like 3 times, and every time they’ve been really professional, and pleasant.

    My escrow account was thousands short due to my insurance increasing, and a radical change in assesments. The guy who figured it out for me even suggested that since I wasn’t paying any interest on the shortage, pay it out over time and put the excess in an interest bearing account.

  33. Elvisisdead says:

    Agreed that you’re either in or out, but if you’re in, there are two different levels (at least in Houston). There’s a 25-year plane and a 100-year plane. They carry different premiums, as well.

  34. swalve says:

    PLAIN!

    Who buys a house in a flood plain?

    And the lady who says the FEMA map is old and shows her house in the middle of a creek? I bet her basement leaks…