Q: Why can’t I just deposit my insurance checks and use them? When I paid the insurance premiums, why did it have to go through my mortgage company first?
When you borrowed money to buy your home, you agreed that one way the mortgage company would be covered was for the mortgage company to be co-insured with you for any damage to your property “enhancements”
If you take your insurance rebuild money and go, your mortgage documents are put up to protect the mortgage company. In other words, your home and property are the loan’s collateral; if you cash the insurance checks but do not rebuild, the mortgage company will have a problem. The loan and insurance documents have systems in place to keep you from doing so.
Unless and until your mortgage company agrees (in writing), every Coverage A check you receive, as well as maybe some of your other coverage checks, will state something like: “Pay to Jane Doe and Jane Doe’s Mortgage Company’s order.”
You must first endorse/sign the check, after which your mortgage company will deposit the funds in its own account and then release the funds to you once you have begun the process of reconstructing your home.
A: Possibly. They could also be listed on checks for “Other Structures,” “Landscaping,” and so on. In paragraph 5, it is also stated:
If Borrower obtains any kind of insurance coverage for damage to, or destruction of, the Property that is not otherwise required by Lender, such policy shall include a typical mortgage clause and shall designate Lender as mortgagee and/or as an extra loss payee…
As a general rule, consider that the mortgage company will seek to be treated as a co-insured on insurance coverage for those items that will or must remain on the property after the house is sold, such as plants, grass, the house, the fence, and the driveway.
However, insurance companies frequently merely co-write Coverage A checks, and Loss Departments rarely object.
Q: Does the lender get to keep more money than the remaining amount I owe them on my mortgage if the insurance checks total more than my mortgage?
A: The mortgage firm should not be permitted to keep insurance proceeds in excess of the loan’s remaining balance. You merely agree in paragraph 5 of the standard California mortgage “… to assign to the holder of the Note broad rights to insurance proceeds up to the amount of the existing loan debt.” As a result, some mortgage companies have a written policy stating that they will only retain funds up to the amount of the outstanding loan balance.
Q: If the policy is already included in the mortgage, why does the company require it?
A: The mortgage firm has a specialized division (the “After you’ve experienced a catastrophic property loss, you’ll have a “Loss Department” that manages the rebuilding funds. This task is frequently delegated to a third-party firm. In either case, the persons you contact with may be unaware of the terms of the mortgage.
Knowledge is a powerful tool. Don’t give up. Read and comprehend your texts, then put what you’ve learned to good use. In general, the Loss Department is not user-friendly. Expect the following to occur:
- The “Loss Department” will not reimburse you the extra money unless you ask for it, or until you request it.
- It’s impossible to get through to a real person in the Loss Department at all, or to get through to a live human being at all.
- Instead of a response that answers your questions, you get a form response to your mails.
Q: Is the mortgage company going to pay me interest on the insurance funds they have on hand?
A: Almost certainly, but not always without a battle. The conventional California mortgage additionally stipulates in paragraph 5: “Lender shall not be compelled to pay Borrower any interest or earnings on such insurance proceeds unless an agreement in writing is established or Applicable Law requires payment of interest on such proceeds.”
Fortunately, California does, in certain ways, have an advantage “the legislation that applies.” According to the California Civil Code:
(a) Every financial institution that makes loans or purchases obligations secured by real property containing only one to four family residences and located in this state and receives money in advance for payment of taxes and assessments on the property, insurance, or other purposes relating to the property must pay interest on the amount held to the borrower. Such amounts shall bear interest at a rate of at least 2% simple interest per annum. The interest will be credited to the borrower’s account once a year or when the account is terminated, whichever comes first.”
Many consumers have been successful in convincing their mortgage company that insurance profits checks to support a rebuild are acceptable “money in advance for payment… for… property-related purposes,” as defined by Code Section 2954.8. Simply put, they receive a 2% interest rate.
CAUTION: We are not aware of anyone who has ever taken this issue all the way to court, so there is no precedent “Final” response
Q: What other steps can I take to ensure that I earn interest on my insurance payments?
A: You could try an alternative line of reasoning. Miller & Starr California Real Estate, the main book on California real estate law, claims that a California court ruling states that if a mortgage firm holds the money in an interest-bearing account, the interest is yours. (This argument is included in Miller & Starr’s treatise California Real Estate, section 10:61.)
Survivors of catastrophic losses have used a number of creative methods to recoup the interest on their insurance benefits. One Cedar Fire survivor requested a copy of the deposit slip indicating the account number into which the money were deposited, as well as the account records for that account showing that funds held there bore no interest or were invested. The mortgage business chose to pay the interest rather than comply with the demand. This example demonstrates that being a pain in the neck might sometimes be more important than whether the statute applies.
A: Not as rapidly as you may think. Let us return to paragraph 5 of the typical California mortgage, which states,
“Lender shall have the right to keep such insurance proceeds during the repair and restoration period… Lender may disburse proceeds for the repairs and restoration in a single payment or in a series of progress payments as the work is completed.”
Q: However, my contractor will not agree to reconstruct my complete home without first receiving payment. What options do I have?
A: You’re correcta it’s “The “business reality” is that a builder will not complete all of the job before receiving any payment. It’s also a “However, most builders are accustomed to working in a situation where they are not paid in full up front, but rather get partial, monthly payments with at least some money put back until the job is completed.
This is something that your mortgage provider is aware of. Because your mortgage requires you to repair or restore your home after a fire, the mortgage company will not hold all of the funds until the end, as this could be a risk “The implied covenant of good faith and fair dealing has been broken.” To avoid being sued, the corporation must play by the rules. As a result, you will receive the funds “Payments in process.”
A standard progress payment strategy is to release 1/3 of the retained funds up front, 1/3 after a 50 percent completion inspection, and 1/3 after a 100 percent completion inspection. There will most likely be none “Until you’re 3/4 of the way through building, don’t worry about the “shortfall issue.”
Q: If I don’t want the money to be used to pay down the mortgage, can the mortgage company just use it?
- Keep a record of EVERY PERSON you speak with, including their name and phone number (as well as the name of their superior and that person’s phone number).
- Treating you well would help them with public relations, something they desperately need in this “sub-prime crisis”!
- You are most likely not their only borrower who has lost a home in your neighborhood. If a trial is held to evaluate whether or not they are treating you fairly, then:
1. It will be on behalf of ALL of their borrowers who have lost their houses as a result of the disaster.
2. Each juror will be one of the following: (a) someone who has lost their home, (b) someone who knows someone who has lost their home, or (c) someone who thinks to themselves, “Oh my goodness, I could lose my home!”
- Request documentation from the mortgage firm regarding what happens to the money while it is in their possession (does it earn interest, and if not, is it invested?) – the answer may be unsettling for them, which is beneficial to you.
Can I deposit a check made out to me and my mortgage company?
You may conceive of your home as yours if you have a mortgage on it, but your mortgage company has a significant stake in it as well. Your mortgage company may force you to insure the property. In truth, your mortgage firm is identified as the lineholder on your homeowner’s insurance policy. If your home is damaged, your insurance company will send you a check to cover the costs of repairs, but the check will be made out to you and your mortgage company. To cash the cheque and collect the money for repairs, you’ll need your mortgage company’s cooperation.
The Check
Everyone who has a financial interest in the property receives reimbursement from the insurance provider. Both of your names will appear on the check if you’re married or own a property with a partner. This is typical procedure in the industry. On the cheque, your mortgage firm will also be stated. Your bank will not cash the check unless all parties involved have signed it. You must sign the check and mail it to your mortgage company.
Escrow Account
The cheque will be cashed and the funds deposited in an escrow account by the mortgage company. It will make payments in installments to cover the cost of repairs, but it will not pay out the entire amount until it is satisfied that all repairs have been completed to its satisfaction. If you’ve ever built a house, you’re probably familiar with this setup. The construction lender disbursed construction loan payments in installments to pay the home’s numerous subcontractors. You’ll go through the same procedure when rebuilding and repairing your home.
Getting the Money You Need
Because you’ll need money to pay contractors to get started on your home repairs, you’ll need to ask your mortgage company for money to make the initial deposit your contractors require. This is frequently 50% of the entire repair cost. Collect repair estimates from contractors and submit them to your mortgage lender. It will write a check for the whole amount, which you can then distribute to the various contractors to begin the repairs. The mortgage holder will disburse the remaining funds to pay for the work after it is completed or nearly completed. Before making the final payment, your mortgage company may request an inspection to ensure that the work was completed correctly.
Personal Property Versus Structure
The actual construction of your home is all that matters to your mortgage provider. It’s likely that the same event that caused structural damage also caused personal property damage, such as furniture. Some insurance providers will send you a separate payment to cover the expense of replacing your personal belongings. Other insurers will write a single cheque for the complete amount of damages. In this scenario, you should ask your mortgage company to send you a check for 100% of the settlement amount that is required to cover the personal property insurance payment.
Can my mortgage company hold my insurance check?
Is it possible for my mortgage company to put a hold on my insurance claim payment? Yes. Your mortgage company has a vested financial interest in seeing that the repairs are completed. Often, the lender will store the insurance check and release payments in stages as the repairs are completed.
How long does it take for mortgage lenders to release funds?
The time it takes for mortgage money to be issued varies depending on the lender, although it is normal for cash to be delivered within 3 to 7 days.
Can I deposit insurance claim check?
Yes, as long as you own the automobile outright and meet all legal conditions, you can cash an auto insurance claim cheque and do whatever you want with the money. If your car is leased or financed, the cheque will most likely be written out to both you and the lienholder, and you’ll need both of their signatures to cash it. In this instance, you will very certainly be obliged to use the check money to repair the vehicle.
How do I cash an insurance check with two names on it?
It’s only necessary for the amount to match what’s on the estimate. If there is a problem, “Both signatures are necessary to cash the check due to the “and” between the names on the check. If there is an exception, “Alternatively, if the cheque is to be cashed, just the body shop must sign.
How long does an insurance company have to settle a homeowners claim?
A home insurance claim frequently results in a considerable amount of damage, whether from a fire or a broken water pipe, to the point where the property may not be safe to dwell for a period of time. A house insurance claim might take anywhere from 48 hours to more than a year to be resolved, depending on a variety of circumstances.
To begin, the length of time it takes to complete your home insurance claim is determined by the type of damage reported. This isn’t always determined by the severity of the damage, but it is determined by the difficulty of restoring the property’s affected areas and repairing or replacing its contents. Even if the damage is more evident in the former, it may be far faster to replace furniture damaged by a huge fire than it is to repair structural defects uncovered by small water damage.
Second, the length of time it takes to process an insurance claim is determined by how many people are engaged. At the very least, the Insurer and a Loss Adjuster are normally involved in a house insurance claim. Before reaching an agreement, the Loss Adjuster will visit the property at least once and may wish to speak with you about the damage multiple times. Following the Loss Adjuster’s inspection, surveyors, builders, or a removal business may be required to assist with the claim or begin fixing the damage.
Why do mortgage companies check insurance?
Your lender has a security interest in the house when you buy it with a mortgage. Lenders, like you, must preserve the value of your house. Your mortgage company is a loss payee as a “co-insured” with you when your home is damaged by a covered loss. Insurance firms provide claim cheques in your name as well as the name of the mortgage company. This function allows your lender to make sure that the money are utilised for the repairs that are required.
Can you use insurance money to pay off mortgage?
Yes, if the amount of the claim is greater than the amount required to pay off the mortgage in full. Our customer service representatives can provide you with a payback estimate. Please provide a letter authorizing Wells Fargo to utilize the cash to pay off the mortgage with the endorsed claim check. Please attach a certified check for the difference if the amount of the check is less than the amount outstanding on your mortgage. Please keep in mind that we are unable to apply claim monies to past-due mortgage payments.