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Volume 3 Number 4
January 23, 2006

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HOMEOWNER REPAIRS AND YOUR MORTGAGE COMPANY

During the repair phase of the hurricane recovery process, homeowners may encounter difficulty getting the hurricane claim settlement released from the mortgage company. An awareness of these issues may help the process go more smoothly, so here are some tips:

Checks made out in name of both homeowner AND mortgage holder

Insurance checks are usually made payable to both the homeowner and mortgage holder.  To receive funds, homeowners should endorse their claim checks and forward them to their lenders.  Depending on the size of the check, your account and payment history and the amount of equity you have in your home, the lender may return all or some of the funds to you or provide guidelines on how the funds will be released to you.  However, lenders may have additional procedures to follow so you should always contact your lender first to find out how they would like you to proceed. CONTINUED

Contract with licensed contractors

Be sure work is being performed by licensed professionals at each stage.  However, if you should choose to do your own repairs, you will generally only be reimbursed to the extent of the receipts that you turn in to the mortgage company that deal directly with the loss.  At the end of your repairs and after the lender has made the final inspection, any remaining funds will be used to reduce the balance of your loan or refunded to you (at the lenders discretion.)

Provide Lender with Repair Estimate and Schedule for Repairs

The lender may require a contractor’s estimate of repair costs before any funds are released.  The lender may also retain insurance proceeds for disbursement as repairs are completed.  Your lender may be willing to release a portion of the proceeds if payments are required to begin repairs.  However, consumers are advised never to pay construction contractors, in cash or in full, before work begins. 

Provide the lender with a copy of the construction schedule. This will enable the lender to provide “draw downs” on the settlement in timely phases. Prior to payment at the end of each phase, the lender may require or conduct an inspection of the work to ensure it is being done properly, according to the construction schedule, and up to code.  Consider the lender your partner in the recovery process. The lender has a financial investment in your home and wants to ensure your home retains its value.

Claim settlement may be applied to bring mortgage payments current

If the homeowner is behind in paying monthly mortgage payments, the lender may apply a portion of the claim settlement to the outstanding balance; however, this is very rare. NOTE: Additional Living Expense (ALE) funds and content funds CANNOT be applied for this purpose.

If you are having problems with your mortgage company, call our Consumer HelpLine at 1-800-342-2762.