Letter from Chase Bank, LLC name can't be on insurance

7 Replies

Anybody else have this happen? I bought a rental in my name, then transferred title from my name into my LLC and also changed the name on the insurance to my LLC. I received a letter from Chase saying "the name on the insurance policy doesn't match the name on our records or your loan documents. We may not be able to accept the policy information as proof of insurance coverage for your loan until this discrepancy is resolved."

Further down "if our records are correct, contact your insurance company to update your policy and send a revised copy".

Also "if we don't receive updated information by May 20th, 2015, we may purchase an insurance policy on your behalf and charge your escrow account for the premium. This policy is likely to be significantly more expensive than a policy you would purchase, provide less coverage for your home and may increase your monthly mortgage payment."

 Is this a way for Chase to discourage the use of LLCs?

If I put the insurance back in my name, I still leave the title in the name of the LLC?

Or do I have to change title back to my name too? And if so what's the point of having an LLC?

Thanks,

Jim

Hi Jim,

Yes, this is a very common occurrence and one that is often not mentioned by those who push getting an LLC for all of your rental properties. Many banks require the name on the insurance policy to match that of the name on the mortgage, regardless of who's name is on the title.

They're not discouraging LLC's, they're covering their own butts just like you're trying to cover yours.

Do some more searching on BP to see what others have done and recommend.

Cheers.

Eric

The bank doesn't lend to LLC's, at least this likely conventional loan as they're not allowed. LLC's can cause additional foreclosure issues in some areas. You violated your Die On Sale clause by doing this, and the bank can insist you transfer it back, or foreclose. If you insist on using an LLC, you need a loan in the LLC's name, which will be a commercial loan, with less favorable terms. The "need" for an LLC is a matter of opinion.

As far as the bank is concerned, you are the borrower. You are on the mortgage/deed of trust and the bank never gave a loan to your LLC. You may have violated the "due on transfer clause" which means that if you transfer title. your loan may be due and payable. The bank will probably not call the note due but it is best not to do so without written permission (which will probably not be granted).

thanks @Eric Black , @Wayne Brooks and @Victoire Van der Pas .

I changed the insurance back to my name and following the advice of my lawyer 

(who has a lot of real estate experience), added the LLC as additionally insured.

The bank has not objected to this.

@Jim Tiernan I realize this is an old thread, but have a quick question on how this all worked out with Chase.

I use Chase also. Have 5 mortgages all in personal name.

Just added my new LLC as Additional Insured for all insurance policies so Chase shouldn’t notice any difference there.

BUT, I also escrow my taxes with Chase. Will they have an issue when the next tax bill comes in under an LLC vs. my personal name? Should I stop eacrowing taxes and pay them separately? Sounds like a pain.

Any advice would be great before I do my deed transfers.

Thanks!

@Joel O'Leary , My properties are titled in my LLC. Insurance in in my name with LLC as additionally insured. I haven't had an issue with tax escrow.