More than two months after Superstorm Sandy, homeowners across New York are waiting for their mortgage companies and banks to release their residential insurance claim settlements. While some insurance companies have handed out insurance settlement checks weeks ago, many people cannot use the money until their mortgage lenders endorse their checks. This is because checks are generally made out to both the mortgage lender and the homeowner.
While homeowners are struggling with the costs of rebuilding and paying their bills, the administrative process in getting checks endorsed by mortgage lenders takes time—often weeks. Until the mortgage companies endorse the checks, homeowners are unable to access the funds.
For homeowners with damaged homes, they stand to lose millions if their homes aren’t repaired or rebuilt to their original state.
The practice of writing insurance claim settlement checks to both the homeowner and the lender is a long-standing practice to prevent insurance fraud. But in the wake of Sandy, with so many people with property damage and needing the settlements to repair their homes, they had to:
- Incur more costs
- Delay repairs
- Dip into their 401K or retirement accounts
This delay in releasing money has held up storm-ravaged neighborhoods from rebuilding, especially in Long Island. This is because many people whose settlements exceed $20,000 are left with a liquidity problem while mortgage companies hold their insurance settlements in escrow accounts and release money in installments as more work is complete.
While banks are required to inspect the home for repairs and confirm that the homeowner is using a licensed contractor for such repairs, homeowners find the process difficult as many contractors want more money up front than what the mortgage company will pay out. Also, homeowners often have to wait longer for repairs since banks send inspectors to approve the contractors and repairs.
Now, eleven major lenders have agreed to speed up the process of releasing initial payments to homeowners to start repairs following Sandy property damages. These lenders include Bank of America, Citi Mortgage, JP Morgan Chase, Wells Fargo Home Mortgage, M&T Bank, Apple Savings, Dime Savings Bank of Williamsburg, Emigrant Savings Bank, Homeward Residential, New York Community Bank and Ocwen Loan Servicing.
However, if you are still facing your settlement money being released too slowly, the New York Department of Financial Services wants to hear from you.