Many people pay their property taxes and homeowners insurance a little each month through their mortgage. The lender then pays the bills when they come due. Mortgage companies like that setup because they can be assured that the bills are paid and their investment is protected. They also like it because most borrowers are required to give a year's worth of payments to the lender up front when they buy a house. The lender has the use of that money until the bills come due.
Most lenders pay the bills on time.
But sometimes the system fails, Lambert said. That is why it is important for homeowners to keep an eye on their lender. The risk when lenders neglect to pay insurance bills is particularly acute in hurricane-prone Florida, because it is often difficult for a homeowner to find a new policy at a reasonable cost, Lambert said. And when it wasn't paid and the policy lapsed it was much harder for them to get a new insurance policy. That is what happened to Ross.