As if it wasn’t bad enough that your house got damaged during the storm now your Insurance guy just handed you a check for the damages with your name on it along with your Mortgage Company.
If your house isn’t paid in full, and you have a mortgage, the insurance company will add your Mortgage Company’s name to the insurance proceeds. You won’t be able to pay your contractor or take the check to the bank until it’s endorsed by the Mortgage Company.
The banks have a department called Loss Draft that deals with money from insurance companies for their customers who have a mortgage with them. Most banks have a standard dollar amount that requires the insurance check be sent to the Loss Draft department for endorsement. There are 2 things that you should do soon after receiving your check. First, your contractor should a have a form for you to sign that gives the contractor permission to speak to the bank and/or insurance company on your behalf. Secondly, you should contact your mortgage company and tell them that you have opened an insurance claim.
Most Mortgage Companies have a generic set of forms that will need to be completed by you and your contractor. Be sure to ask them to include the guidelines for the dollar limits they have that will require you to have the loss draft department endorse the check. In some instances you may be able to just endorse the check and sign it over to the contractor for payment of the work to be done. However, most of the time, a larger claim check will need to be sent in. Depending on the size of the check the bank will endorse it and send it back or deposit it into one of their trust accounts. If the second happens you will receive “draw” payments against the full amount of the check; usually in thirds.
Remember, this is something your Contractor is used to dealing with on a daily basis. As long as a release is signed they can take the hassle and headache away from you by being your spokesperson with your Mortgage Company. You’ve signed an Agreement with the Contractor saying you trust them to fix your house. Now sit back and trust them to handle the paperwork and process with your Mortgage Company.
