The Linde’s insurance agent warned there could be hoops to jump through before the couple’s claims check could be tapped for hail damage repairs.
Namely, the $20,000-plus payment would be written out not only to them, but also the holder of their mortgage, which was no longer the local Stockman Bank that originated their home loan.
The mortgage had been sold to Bank of America. That third-party signature the Lindes needed to unlock their repair money was in a Bank of America branch in Idaho, the location of which the Lindes still aren’t completely certain. The couple had to sign the check, drop it in the mail and hope for the best. They had never dealt with anything like this.
“We had no idea, but it does make sense,” said Laurel Linde. “They are holding the mortgage.”
The May 18 storm that pummeled the Billings area with golf-ball-sized hail generated tens of thousands of claims and many homeowners are now navigating the mortgage industry maze to cash their claim checks.
The requirement to turn the check over to a mortgage holder can be surprising, though the rule is almost always buried deep in the tome of closing documents people sign when buying a home.
Homeowners speaking with The Billings Gazette last week described an array of insurance check challenges.
One woman’s mortgage company informed her that if repairs on her home weren’t completed within 90 days of the issuance date on her check, the entire amount would be used to pay down her loan, leaving her to pay for most of the repair costs out of pocket.
Another mortgage company declined to release a homeowner’s money without first receiving the insurance claims adjustment, contractor’s approved proposal, business license, worker’s compensation paperwork and a fee payment from the bank for inspecting the required documents.
Those requirements are a little more typical, said Wayne Johnston of the Montana Division of Banking and Financial Institutions. If the mortgage holder is a state-regulated bank not playing by the rules, Johnston is a person homeowners can turn to for help.
“Mortgage companies often require language in the mortgage to provide for a certain percentage of the insurance funds to be paid at the beginning of the claim, a certain percentage paid at the halfway point, and any remaining funds are paid after completion of the repairs and inspection by the mortgage company,” Johnston said. “A homeowner should look at the mortgage documents signed at closing if they have questions about how insurance funds will be disbursed.”
Even when all goes well, it can be weeks before money is available for repairs.
“It’s kind of a pain, but everything went through,” said Nick Talmark, whose Sierra Estates home in Lockwood was shredded by hail.
The storm happened on a Sunday. Talmark’s adjuster arrived the following Wednesday, and the check arrived soon after. Talmark signed and mailed the check, along with all the documentation his mortgage holder wanted. The money was available about three weeks later.
Billings Heights homeowner Vicki Gaschk took one look at the requirements for accessing her claims money and put the check aside. That was six weeks ago. In the meantime, she’s had a death in her family and a parent in bad health.
“Working full-time and with everything else going on, I’m too busy to deal with this. I don’t have an extra person to deal with this,” Gaschk said.
She actually has two properties in need of repair, her home and a rental property. Different companies hold the mortgages on the two properties. The insurance check for repairs to her rental property has been fairly easy to deal with. The loan for the rental is through a local bank. She was actually able to walk the check into the bank the get the co-signature she needed.
The check for her home repairs has been nothing but trouble. Gaschk refinanced her home last year to take advantage of low interest rates. The refinancing was done locally, but the loan was sold to Caliber Home Loans, a company she had never heard of.
Caliber wants Gaschk to endorse the insurance check and mail it to a field office in Springfield, Ohio. She’s not comfortable with the security of the check in the mail.
Once it receives the check, her mortgage holder wants to disburse the money in three phases as the work on her siding, gutters, windows and roof progresses. The contractors she’s spoken with would like half the money up front.
“I have two properties in my name. I’m retired out of the military and still work full-time as a nurse. Seriously, I’m a responsible homeowner and to be treated like this, like my word isn’t good enough?” Gaschk said.
An out-of-state bank is most certainly nationally regulated. There is an advocate at the U.S. Office of the Comptroller of the Currency for homeowners who are owed payment from a nationally-regulated bank. However, the OCC is a large government agency that boils most of its counsel to a brief question-and-answer session about insurance on its consumer website www.helpwithmybank.gov.
According to OCC spokesman William Grassano, the terms for paying out an insurance check are pretty much spelled out by the mortgage holder, which has the right as the primary lien holder on a home to take steps to make sure the insurance money actually pays for repairs. The mortgage holder can also inspect the work before issuing payment. None of those things can take place until a homeowner endorses the check and submits it to the mortgage holder to co-sign.