Insurance money mistakenly deposited into couple's account

Benny Kass Housing Counsel

Q: We moved to Jacksonville, Fla., in 2010, but still own a home in Pensacola, Fla., that we are renting to some friends. We got a check in the mail for an alleged overpayment from escrow. I remember telling my wife they had the home insurance wrong on the HUD-1 form, so we figured it was discovered and they reimbursed us. So we used the money to pay bills.
Next thing we know, we're getting a notice that our Jacksonville home insurance hasn't been paid. We spent many hours over several days trying to find out what happened, and got a pretty good runaround. We got them to check the address on the request, and they finally realized the mistake: the address was for the Pensacola house, not the Jacksonville house. The insurance had been double paid.
They asked for the money back and we told them we used it to pay our bills, so we didn't have it. Now the lender has notified us that it has to increase our mortgage payments by $300. So a roughly $700 monthly payment is now over $1,000.
Now, we will be at risk of losing the property because we won't be able to make the payments. Any advice you could give us would be greatly appreciated.
A: I believe I am a strong consumer advocate, but try to be fair to everyone. I do not agree that your lender has the right to increase your monthly mortgage payment based on its mistake. But at the same time, you have to admit that you were unjustly enriched. You got money that you were not entitled to receive.
I would first contact your insurance carrier. If, in fact, the insurance for the Pensacola property has been double paid, you should be able to get that money back.
Has the insurance on the Jacksonville house been paid? That, in my opinion, is the most important issue. While you and your lender are arguing over who pays what, you have to be sure that there is insurance coverage on your house.
I would also talk to the lender, explain the situation, and see if a more modest payment plan can be worked out.
But the bottom line is that you should not have used those funds until you were satisfied they really belonged to you.
Q: I am a one-third owner in the family home along with my sister and sister-in-law. My sister has been living in the house since my father died 20 years ago, rent free. She has not and will not communicate with me. I know nothing about the house or the finances.
What do I have to do to be brought up to date on the property? I am 85 years old; she is 89. It is a two-family house with the upper apartment rented. I don't know what the rent is, or what bank is being used.
A: It's always a shame when brothers and sisters squabble, especially after reaching adulthood. I know that it may cost you some money, but you should consult a real estate attorney in the state where the property is located. The lawyer should first determine the status of title. Are you certain you are a one-third owner?
You should also discuss the matter with your sister-in-law. Does she have any more information she can share with you?
Your attorney will write a friendly letter to your sister, advising her that you want information, and that if she does not cooperate, you will have to file suit against her. While I am sure that you would prefer not to do this, you have potentially lost (and may still be losing) a lot of money.
More importantly, you want to make sure that your last will and testament properly disposes of your one-third share in the house.
benny@inman.com