In some cases, mortgagor must sign a contract with insurance company that includes Chase Home mortgage clause. What is the use and how does the company arrange it?
The experience of getting a mortgage loan from one lending company will be different than the others. Every mortgage lender will own specific mortgage policies. In this article, you will get to know about Chase Home mortgage clause. Without realizing, this particular aspect actually takes a pivotal spot in mortgage loan.
Mortgage Clause in Chase Home
Every mortgage company has to put business as their priority. The company forms mutual agreements that would protect both parties involved. That is the reason Chase’s mortgage clause is established.
What is a mortgage clause? Mortgage clause is a component of an insurance policy. The clause states that in incidents that cause loss or damage in the property being mortgaged, the lender will be able to receive insurance claim alongside the borrower. The damage can be caused by various reasons, including natural disaster and fire. Insurance company will make inspection on the property to decide if the claim report can be approved.
Chase Home mortgage clause is created to protect the lending company’s investment when the property gets damaged. It also encourages borrower to establish insurance system by making it mandatory. In many other cases, insurance is only paid within certain conditions. Government insured mortgage loans (except VA) usually require mortgagor to pay for private mortgage insurance (PMI). Borrower who managed to pay down payment less than 20% of loan amount is also required to establish a PMI. Usually the payment is made only until equity on the property can finally be accessed.
Escrow Account for Mortgage Insurance
In order to facilitate its customers, Chase Home sets up an escrow account for every mortgage loan borrower. Escrow account makes it easier for customers to adhere to Chase Home’s mortgagee clause.
Here are the highlights of escrow account established by Chase Home to accommodate its registered borrowers.
1. Paid Every Month
Customer does not need to send specific escrow payment for the company. Every month, when paying the monthly bill, a portion of it will go directly into the escrow account. The components of bill payment are as followed: loan principal, interest, and escrow. The escrow is further broken into three aspects: private mortgage insurance, homeowner insurance, and taxes.
The establishment of escrow account does not only protect the lending company by ensuring that borrower pays insurance premium. It is also beneficial for the borrower since they will have time to budget their mortgage related spending instead of having to pay a large sum for insurance and taxes at the end of a year.
2. The Amount can be Adjusted Every Year
Adhering to Chase Home mortgage clause, the company is going to review the escrow account annually. As you probably know, depending on government regulations and market conditions, the amount of insurance premium and taxes that need to be paid will differ each year. The review done on one’s escrow account will determine the amount that borrower’s escrow account must gather within twelve months. Because of that, the amount for escrow account that you need to pay every month might be different every year which means that your monthly statements also vary.
3. The Case of Shortage and Surplus
Of course, since the market can unstable, there are cases of shortage and surplus with the escrow account. When your account experiences surplus, you will be able to cash in your extra money (this only applies for surplus above $50). The situation will be different if your account experience shortage because it means that the amount kept in there is not sufficient to pay for your insurance and tax expenses.
There are several reasons that may cause shortage in escrow account. The main cause is definitely unexpected increase in insurance premium and/or property taxes. It can be caused by changing the insurance company as well. Chase allows borrower to switch to another insurance company but with the risks fully handed to borrower.
Here are several alternatives provided by the company in the case of shortage so that Chase Home mortgage clause can still be followed through.
- Making full payment to cover the entire shortage.
- Paying a part of the shortage while the remaining amount is divided into the next year’s payments (12 months)
- Not paying the shortage and opting to divide the amount into every month’s payment within next year.
4. Checking the Escrow Account
In the past, you need to request for customer service’s assistance in order to get information related to the escrow account. However, you can easily check that information by logging into your online account. You can do that by accessing https://secure05b.chase.com/web/auth/dashboard using registered username and password.
Before closing on a mortgage loan, borrower must sign various documents with the lending company’s representative. There is the main mortgage’s term of agreement, however in some cases, insurance agreement that includes Chase Home mortgage clause must be signed as well. The company accommodates easier process by establishing escrow account.