I sometimes find it ironic that all parties involved in a seller-financed wrap-around transaction worry a great deal about the new property insurance being sent to the mortgagee in the new buyer's name and triggering the 'due on sale' clause, however, they rarely (if ever) give a moment's thought to what might happen in the event of an actual claim if funds are made payable to the policy owner (new buyer) AND the 'loss payee'.
As the fourth piece in this series about insuring wraparound mortgages, this article is intended to address the often-ignored issue of property claims and how payment is made by the insurance carrier as well as how it may (potentially) create BIG problems for the buyer and seller in a wraparound mortgage.
