House gone; bank wants flood insurance anyway

Bank of America demanded that Lakewood resident James McKinley buy flood insurance for his house on Barnegat Bay in Brick.

That's not unusual, right? But McKinley's house is long gone, demolished more than two years ago after taking serious damage from superstorm Sandy. The lot is vacant and now for sale.

"They are insisting that I have insurance on a house that doesn't exist," said McKinley, understandably frustrated. Bank of America didn't budge on its requirement until Press on Your Side got involved.

McKinley and his wife Jane purchased the house, which they called Four Winds and was at the very end of Drum Point Road, in 1992. They moved there full time around 2000.

Rescued during Sandy

The McKinleys, and other members of their family, rode out superstorm Sandy in the house's second floor. The ground floor was inundated by the bay. "It was four feet of water with waves on top coming through the house," McKinley said. "Every time it would hit, the whole house would sort of shudder."

A building at the marina across Drum Point Road was lifted off its foundation and slammed into McKinley's garage. His cars were destroyed too. "It was a pretty disastrous day," McKinley remembered.

The family was later rescued by emergency workers who brought them to safety by boat. (Even after Sandy subsided, the area was several feet under water.)

The McKinleys' house was done. After an inspection in July 2013, a Brick inspector issued a "notice of imminent hazard."

"The structure is unsafe to enter. Do not enter," the notice read in capital letters. It ordered the house demolished by Sept. 1, 2013.

The house was knocked down in early September 2013 at a cost of $15,076.

"It was a beautiful place to live," McKinley said. They moved to Lakewood after the storm.

Still paying the insurance

Afterward, McKinley kept paying for his mortgage in Brick, including homeowners and flood insurance. He later read his insurance documents, which said that only the house and contents are insured. "There is no house and there is no contents."

He canceled his homeowners and flood insurance earlier this year. His flood insurer returned two years worth of premiums and his homeowner's insurance company gave back one year's premium.

The cancellation attracted the attention of Bank of America, which told him that he needed flood insurance for his house.

McKinley said he informed the bank three times that Brick ordered him to demolish the house. He sent a copy of the township's violation notice, the invoice for the demolition and a copy of the check he wrote to pay for it. (Those documents were the same that he sent to the insurance carriers.)

But it wasn't good enough, McKinley said. The bank wanted another township document, possibly a permit. However, for a period of time after Sandy, Brick waived the permitting process for tasks such as rebuilding or demolition. So the paperwork was not available.

"They have not responded except to request, now for the third time, that either I buy insurance or they will at my expense," McKinley said.

In an Oct. 8 letter, the bank said the cost of the coverage was $2,520. "We previously sent you notice that our records show the flood insurance on your property expired or was canceled," the letter states. "To date, we haven't received acceptable evidence that you have coverage that meets our minimum requirements."

Press steps in

McKinley contacted Press on Your Side for help.

A Bank of America spokeswoman said the bank would look into the situation. Later, the bank sent an inspector to examine the property. "The visual inspection has confirmed that there is no structure currently on the property, and we have processed a request for a cancellation of the policy," spokeswoman LaToya S. Evans said in a statement.

According to the bank, the Federal Emergency Management Agency requires the mortgage company to notify a customer of the need for flood insurance if a property is designated as being all or partially within a flood zone. Generally, it is up to the customer to submit any necessary documentation to support the removal of the flood insurance requirement, the bank said.

After 45 days, if the customer hasn't "successfully disputed" the need for insurance or signed a flood policy, federal regulation requires the lender or mortgage servicer to secure flood insurance coverage, the bank said.

"We have been working with the customer for several months and as recently as three weeks ago had requested conclusive documentation that the structure had been demolished," Evans said. "This documentation would allow us to process the customer’s appeal to the federal flood plain designation.

"In the absence of this documentation, we have taken the extra step to send an inspector to the property," Evans said.

McKinley said he didn't have what the bank wanted so he had sent the paperwork he believed proved the house was demolished.

Sending an inspector was the right decision. A simple glance at the property would prove there is no house there.

McKinley thanked Press on Your Side for the help. "Obviously, they sent someone here and they looked," McKinley said.

Not over

But it seems it's not over. On Friday, McKinley said he received a letter from the bank. It said the bank has canceled the flood insurance policy taken out by the bank because "proof of coverage for your property or coverage is no longer required."

However the bank has charged him $461.42 to cover the duration that the policy, purchased by the bank, was active. A refund of $2,058.58 was credited to his account.

"They want to keep back almost $500 between the time I canceled my insurance and the time that they went out and viewed the fact that there was no house there," McKinley said. "I am just struggling to get the full refund at this point."

Press on Your Side has contacted Bank of America for some answers. Meanwhile, the letter seems to send some mixed messages. It states he was charged for the policy only during the period when he didn't have coverage that "meeting our minimum requirements." (But the house was demolished in 2013, Press on Your Side would say.)

"If you believe you are entitled to a full refund, you need to provide us with a copy of your new and previous flood insurance policy declaration pages, which include the policy start and expiration dates with no lapse in coverage," the letter states. "If the proof of coverage provided does not meet our minimum coverage requirements, we will mail you a separate notice that you'll need to obtain additional coverage."

Hopefully, the bank will credit McKinley for the full cost of a policy. We'll update the situation when Bank of America gets back to us.

Do you have a consumer problem that needs solving? Contact David P. Willis at 732-643-4042, pressonyourside@gannettnj.com or facebook.com/dpwillis732.