Wells Fargo stuck man with pricier flood insurance

Sept. 30--Long Branch resident Steven Schrenk never asked for more flood insurance.

But for some reason, Wells Fargo Home Lending paid a higher flood insurance premium to Selective Insurance, an increase of about $3,700. He found out after Wells Fargo sent him a statement saying his mortgage payment would increase to fill his escrow and cover the additional flood premium.

"This was a shock," Schrenk said. "It was news to me. There was no explanation as to why."

Schrenk got to the bottom of it and he got a little help from Press on Your Side at the end. It "became a vicious circle of runarounds and double talk," he said.

Here's what happened.

Escrow was short

In August, Schrenk and his wife, Jennifer Smiga, received a letter from Wells Fargo Home Lending informing him that the escrow portion of his mortgage payment, which covers his homeowners and flood insurance and municipal taxes, was short. That can happen if premiums or property taxes rise. A homeowner has to pay the difference, either in one shot or over a year, causing a boost in a mortgage payment.

In Schrenk's case, he discovered that Wells Fargo paid $7,313 for his flood insurance premium to Selective Insurance. Last year, it was $3,612 but it was supposed to rise to $4,424, not $7,313. "I was responsible for the shortage and my mortgage payment would increase as a result," Schrenk said, summarizing the letter's message.

When he investigated his flood insurance policy, he discovered that $7,313 was for Selective's highest coverage option, insuring the home for $250,000 and its contents for $100,000. It surprised him, as he has never made any changes to his policy, Schrenk said. His coverage was supposed to be $149,000 for the house and $56,000 for contents, the level he has had since 2004, when he first bought the house. His small ranch "doesn't even appraise at $250,000 subsequent to Hurricane Sandy," he said.

When he called Wells Fargo, he was told the mortgage company simply pays Selective's invoice. "If there was an increase in my premium, I should contact Selective and take it up with them," Schrenk said, recounting it in a note to Press on Your Side. "I told (Wells Fargo) that if there was a significant increase I should be made aware of it beforehand so I could look into other options."

But when he called Selective he found that his coverage was still at the lowest tier. "They didn't know why Wells Fargo would pay" for the higher tier, Schrenk said.

RELATED: How did the Wells Fargo debacle happen?

Pressing Wells Fargo

A Wells Fargo representative told Schrenk again that the company paid Selective's invoice. Schrenk said he pressed the issue. He demanded that Wells Fargo lower his flood insurance coverage to its previous level and correct the escrow amount. "It should just go back to where it was," Schrenk said. Wells Fargo agreed to make the change and Selective would refund the overage to the mortgage company.

But it took more calls with Wells Fargo, Selective and Schrenk's insurance agency. "Everywhere I go they tell me to talk to the other person," Schrenk said. "It's a complete runaround, vicious circle."

Selective Insurance sent him two refund checks, instructing him to deposit the money and Wells Fargo would withdraw it from his account.

But Schrenk said he and his wife didn't want to deposit the checks. The problem is between Wells Fargo and Selective, so they should handle it, he said.

Schrenk contacted Press on Your Side for some help. "To me, it's one of those situations where someone puts their hand in your pocket and takes money out," Schrenk said.

Press on Your Side contacted Selective Insurance and Wells Fargo and recounted Schrenk's account and his wish that the two companies work it out. The companies were quick to respond.

A Selective representative stopped the refund checks and reissued them to Wells Fargo, according to an email Schrenk shared with Press on Your Side. Schrenk's flood policy was renewed with the correct coverage.

Schrenk was happy for the help. "You were most helpful at making them move and act on this," he said.

A Selective Insurance spokeswoman said the company had no comment, but was glad the issue was resolved to Schrenk's satisfaction.

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What happened?

In a statement, Wells Fargo Home Lending said it adheres to federal requirements for flood insurance coverage on properties with mortgages.

Schrenk's flood insurance was increased due to the estimated replacement cost value for his home, the company said. The low option only provided coverage to $149,100. The middle option raised it to $164,000 while the higher option provided for coverage up to $250,000.

"In order to ensure that Mr. Schrenk had adequate coverage, Wells Fargo disbursed premiums for Option C," the highest level, the company said. "Mr. Schrenk than requested that we remove Option C, revert the policy back to the Option A (lowest) coverage and instead issue a gap policy to cover the difference."

The company said it worked with him to obtain adequate flood insurance coverage without a "significant increase in premiums." Wells Fargo had requested Selective to send the refund directly to the company, but Selective refused, saying it could only do so if Schrenk asked. He did, and the insurer agreed to send it to the mortgage company.

"His payment will remain the same until we receive the refund checks from Selective, at which time we will adjust the payment to reflect the increase in flood coverage," Wells Fargo said. "Any unearned premiums will be properly credited to his escrow account at that time."

Schrenk said he previously had a gap policy as his mortgage balance was about $17,000 higher than his flood coverage. Wells Fargo had no reason to raise his it, especially to the highest level, he said. "This was not like something that was new. This was already in effect," he said. "I was fine where I have been forever."

Do you have a consumer problem that needs solving? Contact David P. Willis at 732-643-4042, [email protected] or facebook.com/dpwillis732.

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