Many Florida homeowners have mortgages that are backed by either the Federal National Mortgage Association or Federal Home Loan Mortgage Corporation. In most of these cases, the homeowners have property insurance that has been issued by a Florida-based company. On Feb. 14, an Ohio company that rates insurance companies around the country based on their financial stability indicated that it will likely be downgrading the ratings of at least 10 of those Florida insurers. This move could create significant problems for affected homeowners.
The concern stems from the fact that both Fannie Mae and Freddie Mac require insurers of properties covered by their mortgages to have A ratings. Once the rating dips below that level, the homeowners can be declared in default on their mortgages. The Ohio rating service stated that one of the primary reasons for the downgrade, which is expected to be to a B rating, is the fact that many of the Florida-based insurers have faced significant losses from claims based on water damage.
Another cause for the demotion is the practice of some contractors to convince homeowners whose properties have been damaged to assign over their benefits, with an eye towards filing lawsuits against the insurers if the claims aren’t paid. A state lawmaker stated that the downgrade could affect up to 30 percent of Florida homeowners, forcing them to obtain more expensive coverage from the state-run Citizens Property Insurance Corporation.
Even homeowners who have insurance with companies that are not on the list could be affected, as the reduction in competition might result in those companies denying more insurance claims. People who have been harmed by such coverage disputes may want to meet with an insurance law attorney to see what recourse may be available.Share