NLIC.org

Dennis Said:

can a mortgage company force you to buy homeowners insurance though a certain insurance company?

We Answered:

Hi, well you're absolutely correct! A mortgage lender requiring you to purchase insurance through a particular company or agent is in violation with Truth In Lending Laws, as it's not disclosed if there is any financial relationship between the lender and the insurer, with the Fair Housing laws requiring a borrower to conduct business with a particular insurance carrier, and probably several State Laws if the mortgage company is a licensed mortgage broker, a federally insured bank or a national bank.

The Deed of Trust used to secure the mortgage, or the Trust Deed, in some areas, usually states that the borrower is required to carry a policy of insurance ...acceptable to the mortgagee, this means they may reject a policy if the have a good reason to do so, but they can't require a particular insurer.

This would be a serious violation and perhaps you misunderstood, if you need to report a violation, contact the State Department of Finance, under Economic Development, or your state Attorney General's Office. Give them the name of the institution and ask what agency has authpority over them. National Banks would be the Comptroller of Currency, State Banks is Federal Deposit Insurance Corporation, If the lender is an Insurance Company they will also be under the Commissioner of Insurance. Each State also has it's own Banking Authority.