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Dr. Don Taylor, CFA, Bankrate.com advice columnist Lender won't cancel hazard insurance

Dear Dr. Don,
My mortgage company refuses to stop charging for hazard insurance when I have had my own homeowners insurance since I refinanced my mortgage. And also they refuse to refund this money. Who do I contact to complain about this and recoup my hazard insurance premium?
-- Mike Morass

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Dear Mike,
There's more than one kind of hazard insurance, especially depending on where you live. Flood insurance, for example, isn't part of a homeowner's policy. Nor is windstorm coverage in some areas of the country prone to hurricanes.

Review your closing documents to see if you agreed to the policy provided by the mortgage company and what hazards it covers. That said, you should be able to eliminate any double coverage arranged at closing by the lender with your current homeowner's policy. Recouping past coverage isn't likely, but any unearned premium is refunded when a policy is canceled.

Originating lenders aren't supposed to bundle homeowner's insurance into the closing package when originating the loan, although they can and do offer to arrange coverage. What's required at closing is proof of homeowner's insurance. You bring your proof of coverage to closing. If an escrow account is required, policy premiums in subsequent years are paid from the escrow account.

Once you've established that you do in fact have duplicative coverage, and that you didn't agree to purchase the coverage arranged by the lender, you're ready to start complaining.

Your state's insurance commissioner is the logical place to start. The National Association of Insurance Commissioners, or NAIC, has a directory on its Web site.

Then turn to the regulators that oversee your lender. That will depend on whether your lender is a national bank or an operating subsidiary of a national bank. If it is a national bank or subsidiary, the regulatory body is the Office of the Comptroller of the Currency, or OCC.

The OCC site lists other regulatory bodies for financial institutions other than national banks.

Send a "qualified written request" under Section 6 of the Real Estate Settlement Procedures Act, or RESPA, to your lender documenting your issue with the hazard insurance on the loan. You'll need to talk to an attorney if you want to pursue remedies under RESPA for actions taken by the lender.

One of these avenues should get duplicative coverage canceled. I'm less optimistic about recouping the past earned premiums but that could happen depending on what was signed at closing.

To ask a question of Dr. Don, go to the "Ask the Experts" page, and select one of these topics: "financing a home," "saving & investing" or "money."

Bankrate.com's corrections policy -- Posted: March 21, 2007
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