Q: Home is in foreclosure and just received a refund check for cancelled home owners insurance policy. Can I cash this?
Sheriff sale to be held in October, but lender is entering into a short sale agreement in the next 3 weeks.
A: Risk of loss follows title to the real estate. You do not say whether the foreclosure sale has been held, or whether the sheriff's deed has been issued to the successful bidder. Nor do you say who caused the cancellation of the home owners insurance. But, "can" you cash the refund check? Yes. If the check came to you in error, it does not appear to be your fault. And I assume that the premiums were being paid by the mortgage lender, from an escrow fund for taxes and insurance that was funded by your monthly mortgage payments. Cash the check and see what happens. If your mortgage lender demands the money, make them prove to you that they are entitled to the proceeds of the check. My gut sense tells me the mortgage lender got all the relief to which it is entitled in the foreclosure judgment.
You may well have remaining personal liability to the mortgage lender for some deficiency between the sale price of the property and your loan balance, but cashing the insurance premium will not have a significant effect on that liability or the amount thereof.
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