I recently received a call from a frustrated homeowner following a fire that broke out in his family home while they were out to dinner. The despair he felt about the property damage was exacerbated by the fact that he was having trouble with his mortgage company releasing payments for the repairs. The homeowner wanted answers and inquired as to why the checks were sent to the mortgage company, not directly to him, in addition to the reason for incremental disbursements.

In his case, the checks sent to the mortgage company included his name and the mortgage company’s name. Because each has an interest in the property, both names are included on the check. Generally speaking, the mortgage company wants to be sure the homeowner utilizes insurance proceeds to make and complete necessary repairs—thereby protecting their interest in the property. In some circumstances, as with the homeowner I spoke to, incremental payments are made as repairs are completed and then additional funds disbursed to continue the repairs process until full completion. Read your full insurance policy and your mortgage agreement to ensure you complying with both. It is important you understand your contractual obligations and duties regarding each of these.

Did the insurance company fail to include your name on the check altogether? If so, contact your insurance company and request the check be re-issued to both you and the mortgage company.

Has the mortgage company failed to communicate its requirements to release the funds to you? Under the Texas Insurance Code, within 10 days after receiving the insurance proceeds, the mortgage company must tell you what it requires from you prior to release of the funds. Then, once you have provided evidence sufficient to prove you have fulfilled those requirements, the mortgage company must release the funds, upon your request, within 10 days.

Need more information? The Texas Department of Insurance website provides helpful tools and resources for additional information and assistance, including:

  • If you have a concern about a private mortgage lender, you should contact the Federal Trade Commission at 1-877-382-4357. You may also visit its website at www.ftc.gov. You might also want to contact the Office of Consumer Credit at 1-800-538-1579 or online at http://occc.texas.gov/.
  • If the lender is a state-chartered savings and loan, or bank, call the Texas Department of Savings and Mortgage Lending at 512-475-1350.
  • If the lender is a federal chartered lender, call the Office of the Comptroller of the Currency (OCC) Customer Assistance Group at 1-800-613-6743.
  • In some instances, the U.S. Department of Housing and Urban Development (HUD) can help. Call HUD at 1-800-225-5342.

As always, if you need assistance understanding your insurance policy and how it may affect your insurance claim, you should contact an experienced insurance professional.