Picture this…disaster strikes and your home has suffered major fire damage. You contact your insurance company to make your claim. What happens next?
You discover that your claim will first have to go to the mortgage company. So how do you get insurance funds released?
Getting the mortgage company to release insurance funds takes patience and tenacity. But armed with some extra knowledge, you can take it one step at a time and feel more confident in the outcome.
Here are 10 facts you should know as you begin the process.
1. Mortgage Lenders are Co-payees for Insurance Claim Checks
When you purchased your home and applied for the mortgage to pay for it, you essentially agreed to the mortgage company having a lien on your property. So, when disaster hits and your property takes on damages, the mortgage company has a stake in the repairs.
When the insurance company cuts the check for the repairs, they will write it out as “payable to Mr. John Doe and XYZ Bank.” So, you will need to send the check to the mortgage company to get their signature before you can cash it.
2. Repairs Must Be Complete for Fund Release
Mortgage companies want to make sure you don’t take the insurance money and high-tail it out of town. Their interest is in the real property – the house, the yard, the fence, the driveway – anything permanently affixed to the land. And they are considered co-insured on any insurance that covers it.
They want to make sure the repairs are complete before they release those funds. So, the lenders have the right to hold on to those funds until all the work is completed.
If you buy replacement items lost before the funds have been released to you, you should keep all your receipts. That will make reimbursement easier
3. Contractors Won’t Work Without Payment
Yes, your contractor will expect a down payment to begin rebuilding your home. And mortgage companies know that. The mortgage company will most likely deposit the money in an escrow account. They will pay out what they call “progress payments” so the builder can be paid in installments as the project progresses.
Many contractors have forms to allow the mortgage company to pay them directly so it doesn’t go through your hands. Just make sure you approve of the work they do.
You should keep all receipts for any out-of-pocket payments to contractors while you’re waiting for the dispersement of the funds.
4. Additional Living Expenses Checks Can Help
If you have lost the ability to live in your home, you should get a separate check for additional living expenses. This money is to help pay for hotels, car rentals, food, supplies or any other expenses you might face while your home is in disrepair.
This money should be released to you immediately. You should contact your mortgage company to get them to sign off on this check and send it to you right away.
Those funds aren’t tied to the repair of your home and should be sent to you to help you as you try to secure yourself and your family.
5. You May Get Multiple Checks
Your insurance policy, depending on what was damaged, could send multiple checks for different coverage. For example, if you lost belongings inside your home – like in a fire or flood – you will get a check to replace those items a lot quicker.
That money is not for the real property and your mortgage lender doesn’t have any reason to keep it. Also, you should get a living expenses check to help cover other costs, like staying in a hotel while your home is repaired.
But, if your home was also damaged and you need funds to repair it, that is a different claim. That money may not be dispensed right away.
6. Take Pictures of the Damage
You’ll want to contact your insurance company to make a claim as quickly as possible after you experience disaster. Take pictures to help move your claim along.
You’ll be able to send pictures of the damage once you have a claim worker assigned to your case. Your claim worker will then be able to assign a claims adjuster to come out in person to see the damage and make an estimate for repairs.
The pictures will give him a clear understanding of the damage before he arrives, helping him prepare before coming in person.
7. Working With Your Insurance Company
When you contact your insurance company, make note of the people you talk to and when. You might want to make a file or start a journal for the process.
Ask questions about the process so you feel comfortable about what to expect. Remember to follow up and make sure the insurance company has everything they need from you.
8. Reach Out to the Mortgage Company
In most states, the lender is required to notify the homeowner of what is required of them to release the funds. So, it never hurts to be proactive. Contact your lender and find out how to get the insurance funds released.
9. Mortgage Companies Cannot Take the Funds
The mortgage company can’t take the funds for repair to your home and apply it to your loan. If the payment amount is more than the balance due on your loan, the mortgage company is not allowed to apply the money to your mortgage and then only send the balance.
If something like this happens to you while you’re waiting for your funds, you should contact a lawyer immediately. The mortgage company does not have that right.
10. Use Patience
You definitely want to be firm with the mortgage company when you’re trying to get your funds released. But remember, the person on the other end of the phone will respond better with patience and kindness than if you’re nasty and rude.
Chances are the mortgage lender is a big company – or worse, a government entity like Fannie Mae. The process is long and tedious and sometimes people drop the ball.
Stay in touch with both the mortgage lender and the insurance company. Make sure to dot all your “i’s” and cross your “t’s” and keep at it. You will get your funds released and your home repaired faster.
Need Additional Help?
Here at The Insurance Coach, we’re standing by to assist you in the aftermath. If you’ve experienced any kind of disaster, reach out to us for support. We’re here to help.