Policyholder Question on How to Get Mortgage Company to Release Funds from Property Insurance Claim
This question was originally answered by public adjuster Dick Tutwiler for United Policyholders “Ask an Expert” where he contributes his experience to helping property owners who have insurance claim questions.
Q. If the mortgage company holds on to my insurance repair check and delays my ability to rebuild my damaged home by hanging onto my insurance check, is there an agency that regulates mortgage companies that I can file a complaint with? Policyholder from Ocala, Florida
A. It makes little sense for mortgage companies to withhold funds to make the necessary repairs as authorized by the insurance company. By doing this, it devalues the property they are holding the mortgage on. There is however an issue where the mortgage company will probably tell you where they have been burned before by people taking the insurance money and not making the repairs or pocketing some of the repair money and doing sub standard repairs.
Our experience has been that if you send your mortgage company a copy of a signed repair contract detailing either work that was already paid for or which will be done by a licensed contractor, they will release draws to you . Typically the draw will be in thirds as work is completed, with the final payment once a certificate of occupancy is issued by the building department. If you are dealing with a lender who wants to call the mortgage or apply all of the insurance proceeds to the outstanding balance, you need to check with a real estate lawyer or an attorney who deals with mortgages and banks who can give you advice based on the law in your state.
In regards to lodging a complaint, you can try the officials at the state level such as the Florida Department of Financial Regulation that oversees banking and the mortgage business. Also get the Office of Insurance Regulation (aka the insurance commissioner’s office) involved. It does no one any good to have properties in disrepair and we have found that with a little push most mortgage holders will work with you to restore the property. Also read your insurance policy. Some have provisions that if the loss is under a certain dollar amount they will issue a check directly to you without including the mortgage company’s name on the check. Keep pushing and work out a plan that fits you, your contractor, and the lender.
If you have questions regarding any property insurance claim related issues please call 800.321.4488 or contact us to submit a question to one of our public adjuster or insurance claim experts.