Reader Nate and his wife recently bought their dream home, which they admit is more modest than most people’s dream homes, for $60,000. During closing, they wrote in their offer “that if the home was found to be in a flood plane we withdrew our offer,” but were happy to find out that the house was, in fact, not in a flood plain. That is, until Chase, decided that their house was in a flood plain after all and is requiring $185,000 in flood insurance.
Nate says:
Approx. 4 Months ago I found my dream home, however, my dream home is more than likely far less extravagant than what most people might consider their dream home, as I’m a recent college graduate and as of 2 months ago, a newlywed. That being said I don’t have much money, but I managed to find a decent older 2 story home that I loved. More importantly my at the time wife-to-be loved it as well. Needless to say we purchased the home as soon as we could.
We were approved in no time to purchase our $60,000 home. We of course chose Chase as our mortgage lender because my wife had previously done all her banking through them and they seemed to have their act together, boy was I ever wrong. We did everything cautiously. We hired a top notch inspector to come out and check everything out, despite the home being 90+ years old everything was in tip top shape, save for a few windows here and there. No problem.
This is where things get interesting. Because of a previous home we had looked at that had fallen in a flood plane we were certain to write in on our offer that if the home was found to be in a flood plane we withdrew our offer. However, we were happy to find that the house was in the clear. We closed on the home May 29th.
One fine day whilst sitting at my dinner table eating lunch with a friend of mine and my soon-to-be wife (at the time), my soon-to-be wife began screaming in the other room (where our mail came in). I ran in to see what the problem was, and there in her hands she held a note from Chase stating that they were “Sad to inform (us) that your home NOW lies in a flood plane and requires flood insurance.” (my own emphasis added) We were shocked and devastated. However, life goes on right?
I went to my insurance agent a few days later to get things taken care of (mere weeks before my wedding). When I went in to talk to him we discovered that chase was demanding we carry $185,000 worth of flood insurance. I was blown away… There was no way i could afford that sort of coverage which came out to be around 200 a month. I immediately began investigating. Within a few days of investigating I discovered that there had been no changes to the FEMA flood maps in my area since 2002, which means there was no way my house had JUST been put in a flood plane, it had been in one all along but Chase failed to tell me so before I closed on the home. I decided to look into how they could make such a mistake, turns out they were using a flood map from 1990 to determine if I was in a flood plane or not… a map that was over 18 years old. How could they do such a thing? I was Irate.
After some talking with some “higher ups” at Chase I agreed I would pay flood insurance on the home at $60,000 worth of coverage which ran me around 45 a month. I only agreed to this because they told me nothing else could be done.
Fast forward 2 months-
I’m now happily married, and I thought things were going great until…
I received yet another letter from Chase stating that we failed to purchase an appropriate ammount of flood insurance and that we needed $185,000 worth of coverage….
I’m at my wits end, I cant afford that much insurance and I never would have purchased the home had i known it was in a flood plane… Its neither my wife or I’s fault that our home is in a flood plane, so how can Chase be doing this to us? Adding that much extra a month to our bills will seriously put us in a financial strain. We both are recent college graduates and both have student loans to repay, hence why we went after such a cheap home. Please help us get this out there and in the public eye.
We took a look at what the Office of the Comptroller of the Currency (the agency that regulates national banks, like Chase) had to say about flood insurance, and we have good news and bad news.
The good news is that you’re only required by law to have as much flood insurance as you have outstanding principal on your mortgage:
At a minimum, the insurance coverage must equal the outstanding principal balance of the loan. Coverage must be obtained and maintained throughout the term of the loan.
The bad news is that if your house really is in the flood plain, there’s not a lot you can do about it. The OCC recommends that you contact FEMA’s Flood Map Assistance Center if you dispute the maps your bank is using.
National banks determine if flood insurance is applicable based on a review of the appropriate flood maps. If you believe that the flood map used by your bank incorrectly identified your property as being in a Special Flood Hazard Area (SFHA), Federal law allows the lender and borrower to jointly apply to the Federal Emergency Management Agency (FEMA) to request a review of the decision.
Visit FEMA’s Flood Map Assistance Center or call them at 1-877-336-2627.
As far as dealing with Chase’s general incompetance, we’re afraid this might be a job for a consumer lawyer.
Answers About Flood Insurance [OCC]
(Photo: mistaken poet )
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If you have copies of your offer on the home, would the stipulation that you would withdraw the offer if the house was found to be in a flood plain make the mortgage contract null?
How does the mortgage company have anything to do with the initial offer on the house, which the OP said would be withdrawn if the property was in a flood zone? He didn’t make the offer to the bank, he made it to the seller.
I know that my mortgage says that, if the maps are redrawn and I am suddenly in a flood plain, I will then have to get flood insurance. That is perfectly legal, and if that is the language Chase used, the OP may be out of luck.
i never bought a home but is the offer sheet on file somewhere that shows the offer was contingent upon whether the home was in a flood area? if so, can a judge nullify the agreement because it is in violation of what was agreed upon? probably not but maybe a lawyer can make that argument and you can get what you’ve paid so far plus interest back from the bank.
This is what you get for not ruining your credit in college and qualifying for a home loan. Good luck with the flood insurance – I’ll just keep sitting pretty in my uninsured, one-bedroom basement apartment.
Guess I should’ve gone to FreeCreditReport.com.
I don’t see how the mortgage company can change the terms of the mortgage after you’ve closed.
Your closing statements are a contract between you and the company, which should include all the conditions of the agreement. Among those conditions should be the amount of insurance you are required to have. It doesn’t seem that they should be able to change that any more than they can raise your interest rate or charge you newly-invented fees.
If the house was in the flood plain, the seller (at least here in MN) is REQUIRED to disclose that and the listing agent is supposed to verify this.
Failure to disclose can result in the buyer being able to back out of the purchase and/or to collect substantial financial damages from the seller. It is essentially fraud. The big catch here in MN is that you must prove that the seller deliberately knew and failed to disclose – e.g. they had flood insurance coverage. Last, these things are typically negotiated and settled without the court getting involved although sometimes court is necessary.
We had such a situation where the previous owner not only failed to disclose major problems, but also stole fixtures which were to stay with the house, and left garage and junk virtually everywhere. Legally, we could have sued them, but the check for the property from our mortgage company to them was seized in the real estate law office by the party from which they bought the property. Turns out the people we bought it from had bought it contract for deed and made only a few payments on the house, meanwhile living in it for years without paying on the contract. We couldn’t sue simply because the seller had nothing to recover.