A property loss, to say the least, is a complicated and time-consuming process. Getting that insurance check (also called a loss spin) is often only half the battle. If you have a mortgage, your mortgage servicer, as well as the entities that invest in your loan (such as Fannie Mae and Freddie Mac) have a say in how, when and if they will agree to put their endorsement on your loan. check, or hold your check and disburse funds to you and your contractor to begin the necessary repair work.

What do you mean they can hold my check? Why is it my mortgage company’s business?

When you signed your mortgage paperwork, there was no doubt a clause that required homeowners insurance to be in force at all times, in amounts required by the lender. If you default, the mortgage company will purchase and charge you for the insurance placed by the lender. You also agreed to report property losses to your insurance and mortgage company, and gave your lender the right to determine how, when, and even if your check is released so you can repair your property. Of course, they will insist that you repair your property rather than spend the money elsewhere. Your insurance policy includes a loss paid, or mortgagor clause, that states how insurance proceeds affecting the home and the lender’s interest in the property will be paid. Because your check will be made payable to all parties applying for the mortgage, as well as the mortgage company, the mortgage company will need to sign the check. Depending on the amount of loss you have suffered, there are several scenarios that come into play.

My loan is current and the check is for only a few thousand dollars. Now what?

Typically, depending on the mortgage company, if the investor limit (the amount investors in your loan determine they will endorse and release the check by) is less than 10-15,000 and the loan is current, the company Mortgage company will simply sign and release the check. If your mortgage company is a bank that has branches, you may be able to take it to the bank. All parties to the check must sign, and usually the owner must be present, armed with a copy of the insurance adjuster’s report or worksheet. If there are no branches in your area, you will need to send the adjuster’s check and report to your mortgage company (often actually a company you outsource your mortgage services to). If you want your check returned by express mail, you will most likely need to provide an express return envelope. Pay your contractors and you’ll be on your merry way.

I just got off the phone with my mortgage company and they told me that mine is a “supervised claim”. What’s that? Why can’t I sign my check?

When a mortgage company monitors a claim, it is because the amount of the loss, as determined by the actual cash value on the adjuster’s worksheet, is above the threshold at which the investor will sign the check without verifying that it is being paid. doing the job. to the satisfaction of the lender. A mortgage company can also monitor the claim if the loan is in default. (It’s amazing how many people I’ve dealt with whose loans are deeply delinquent or foreclosed on who are very upset that their check won’t be released right away.) In most cases, the lender will require the check to be signed and sent to them, and they will in turn send the payment to the contractors in thirds. A typical schedule might be 1/3 at the beginning of the claim as a down payment to the contractor, 1/3 after a 50% inspection, and the final 1/3 after a 100% inspection is completed to the satisfaction of the mortgage company. If you have the ability to be your own general contractor, you may be allowed to self-contract, but you will need to be responsible for submitting paid receipts. You may need the following documents from your contractor(s), some of which will be provided by the mortgage company.

• Insurance Adjuster Worksheet or Summary
• IRS Form W-9 or a substitute provided by the lender. Your contractor completes this form with a tax ID or Social Security number. This is so the lender can set up an account for the contractor to send checks and tax forms to at the end of the year. A physical address, not a PO Box, must be on the document.
• Conditional Release of Lien: Neither you nor the lender want a contractor to place a lien on your home after the work is complete, saying they are owed more money than indicated by the original contact. The conditional lien release must usually match the amount of the contract the contractor has with you as the homeowner.
• Signed contract between you and the contractor. Again, the amount of the contract must match the conditional release of the lien.
• Certificate of completion. Some mortgage companies require a form signed by all homeowners stating that the work was completed to the homeowners’ satisfaction.

When do I get my first check?

If all forms are filled out correctly, I’s dotted and T’s crossed, once the lender verifies that the contractor is who they say they are, you can receive a check, payable to you, to any co-borrower, and the contractor within about two weeks. In my experience, it’s best to check with your lender’s draft department by phone every other day. Your contractor will only be able to receive information from the lender with your written permission, so keep that in mind if you want the contractor to monitor the claim and make inspection requests.

Does my contractor require more than a third payment? What should I do?

Depending on the mortgage company and the status of your loan, your lender may have a procedure in place for management to review situations like this as an “exception.” The better off your loan is, the better your chances of getting approved.

I did everything they asked me to and I can’t get my checks.

Loss Draft departments are overloaded with work, and it may just require persistence from the beginning to the end of the process. Don’t assume that if you sent or faxed documents that they have, they were all correct and the money will be on the way. Do not leave anything to chance! ALWAYS follow up!

What if I have a first and a second mortgage?

Generally, the first mortgage holder will require all other parties to sign the check before presenting it to the first mortgagee. Occasionally, a second mortgage may require documents from the first mortgage indicating that the first mortgage will oversee the claim.

There are a lot of variables and situations I can’t cover here, but I hope that if the unfortunate happens, you’ll be at least a step ahead of the game and on your way to completing your repairs and getting home a little faster.