A loss of your property, to say the least, is a complicated and time consuming process. Getting that insurance check (also called Draft Loss) is often only half the battle. If you have a mortgage, both your mortgage service company and 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 give your loan backing. 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 my mortgage company doing business?
When you signed your mortgage paperwork, there was undoubtedly a clause that required property insurance to remain in effect on the property at all times, for the amounts required by the lender. If you do not comply, the mortgage company will buy it and charge you for the insurance provided by the lender. He also agreed to report property losses to his insurance and mortgage company, and gave his lender the right to determine how, when, and even if his check is released so that he can repair his property. Of course, they will insist that you repair your property instead of spending the money on other purposes. Your insurance policy includes a loss or mortgage beneficiary clause, which sets out how the insurance proceeds affecting the home and the lender’s interest on the property will be paid. Because your check will be made payable to all parties applying for the mortgage, as well as to the mortgage company, the mortgage company must sign the check. Depending on the amount of loss you have suffered, there are various scenarios that come into play.
My loan is current and the check is for only a few thousand dollars. Now what?
Generally, and depending on the mortgage company, if the investor’s limit (the amount in which the investors in your loan determine that they will approve and release the check) is below 10-15000 and the loan is in effect, the company mortgage will just sign and drop the check. If your mortgage company is a bank that has branches, you can take it to the bank. All parties to the check must sign and, generally, 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 check and adjuster’s report to your mortgage company (often actually a company your mortgage services subcontract with) and they will mail the check to you. If you would like us to mail the check to you by express mail, you will most likely need to provide a return envelope overnight. Pay your contractors and you will be on your merry way.
I just spoke on the phone with my mortgage company and they told me that mine is a “monitored claim”. What is 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 limit at which the investor will sign the check without verifying that the work is being done. to the satisfaction of the lender. A mortgage company can also monitor the claim if the loan is in default. (It is surprising how many people I have dealt with whose loans are deeply in default or foreclosure are very upset that their check will not be released immediately.) In most cases, the lender will require that the check be signed and mailed to them, and they in turn will send the payment to the contractors in thirds. A typical schedule could be 1/3 at the beginning of the claim as an advance to the contractor, 1/3 after a 50% inspection, and the final third after completing a 100% inspection 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 have to be responsible for delivering the 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 that the lender can establish an account for the contractor to send checks and tax forms at the end of the year. A physical address, not a PO box, must be on the document.
- Conditional Lien Waiver: Neither you nor the lender wants a contractor to place a lien on your home after the job is completed, saying they are owed more money than the original declared contact. The conditional lien exemption should normally match the amount of the contract the contractor has with you as the owner
- Contract signed between you and the contractor. Again, the contract amount must match the conditional lien exemption.
- Certificate of completion. Some mortgage companies require a form signed by all owners indicating that the work is completed to the satisfaction of the owners.
When do I receive my first check?
If all the forms are completed correctly, the Is are dotted and the Ts are crossed, once the lender verifies that the contractor is who they say they are, they can receive a check, made for you, any co-borrower, and the contractor within approximately two weeks. In my experience, it’s best to check with your lender’s Loss department by phone every other day. Your contractor can only receive information from the lender if you authorize it in writing, so keep this in mind if you want the contractor to monitor the claim and make inspection requests.
Does my contractor require more than a third? What should I do?
Depending on the mortgage company and the status of your loan, your lender may have a procedure for management to review situations like this as an “exception.” The better your loan is, the better your chances of getting it approved.
I have done everything they asked me to and I cannot get my checks.
Loss Draft departments are overworked, and may require persistence from start to finish. Don’t just assume that if you faxed or sent documents that they have them, they were all correct and the money is on the way. Do not leave anything to chance! ALWAYS follow up!
What if I have a first and second mortgage?
Generally, the first mortgage holder will require all other parties to sign the check before sending it to the first mortgagee. Occasionally, a second mortgagee may require documents from the first mortgagee indicating that the first mortgagee will oversee the claim.
There are a lot of variables and situations that I can’t cover here, but I hope that in case the unfortunate happens, you are at least one step ahead of the game and on your way to completing your repairs and going home a little faster.