Dynamic Accident Lawyers: Are Homeowners Insurance Claim Checks Held by Banks?

The mortgage website HSN has explored a disturbing trend: mortgage lenders holding homeowners insurance payouts “hostage.”

This concern has grown out of reports that some homeowners who lost their homes in Bastrop, Texas had trouble getting access to homeowners insurance payouts after their homes were destroyed in fires.

The homeowners reported that their mortgage lenders forced them to use the homeowners insurance payouts to pay down or pay of their mortgages instead of releasing the funds for repairs.

When a person has a mortgage, their lenders have a substantial investment in the home. And on certain legal matters, like homeowners insurance payouts, checks must be endorsed by both the homeowner and the lender.

This can become a point of contention when the bank argues that the money should be used to pay down the mortgage instead of using it for repairs. Since the check cannot be cashed without an endorsement from the lender, homeowners may feel like they have few options.

In a statement from Michael Northagen, the VP of Wells Fargo’s mortgage department he says “the desire of the lender is always to have repairs made to a property.” Since a home is an investment to mortgage lenders, it makes sense that they would want to see a damaged home repaired.

And statements like the one from Northagen suggest that it’s unlikely to see the kind of situation facing homeowners in Texas very often. Northagen qualified his statement by saying that perhaps in a situation when a home is well past due, or in foreclosure would a bank make demands like those made in Texas. Northagen says that such situations are best handled on a case-by-case basis.

Homeowners Insurance Claims

After the massive meltdown in the housing market, more and more regular Americans have found themselves behind on mortgages. During the economic collapse of the 2000s, many homeowners found themselves behind on their mortgages, possibly putting themselves in complicated positions when the issue of homeowners insurance comes up.

This could expose homeowners to tricky situations in terms of property insurance claims, and may require an insurance lawyer to sort the situation out.

If a person is behind on their mortgage, they may have trouble getting the bank to release homeowners insurance payouts for repairs. In this case, homeowners insurance payouts may be applied towards the balance of the mortgage instead of repairs.

In fact, a consumer advocacy group called United Policyholders states that one-third of homeowners who answered a post-disaster survey found that their lenders wanted to put some of the funds towards paying off their mortgages before releasing funds for repairs.

United Policyholders has gone to the Texas Attorney General’s office with these complaints, who is investigating the matter. According to United Policyholders, two homeowners only received part of their homeowners insurance payouts, and another received none, with the entire amount paid towards their mortgage.

Though some banking officials have stated that situations like this are rare and unusual, a homeowners insurance class action lawsuit investigation has been launched to explore the possibility of legal action over accusations that lenders are not releasing funds to repair houses after natural disasters.

A homeowners insurance lawsuit could seek to obtain the release of homeowners insurance payouts to make repairs or rebuild after natural disasters like the fires in Texas or storms like Hurricane Sandy.

Join a Free Insurance Property Claim Class Action Lawsuit Investigation

If you have experienced difficulty recovering insurance property claim money from your mortgage company, you may have a legal claim. Submit your information now for a free case evaluation. If you qualify, a lawyer will contact you to discuss the details of your case.

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