Inside the Mortgage Company: Why is it Taking So Long to Get MY Money?
A Look into the Mortgage Company
When consumers have a mortgage loan and damage is done to the property, the process of getting the funds and getting the work completed can sometimes take months (and sometimes even years). In this article, I will explain to you what goes down at the mortgage company in regards to the claim checks that you receive from your insurance company. Now before we get started, let's discuss some common issues people have towards mortgage companies.
Some homeowners feel that the mortgage company sits on their checks and does not want the funds to be disbursed to the homeowner. This is not true at all. The mortgage company also holds interest in the property, so why would they want to keep their investment in a bad condition? The truth is, the money is deposited into the homeowner's restricted escrow account until conditions are right to release the funds (which we will discuss these conditions later).
Another misconception is that the mortgage companies and insurance companies work together and try to give the homeowner the least amount of money possible for the repairs. This is also very untrue. Mortgage and insurance companies do not like each other that much, so NO they are not working together against you. The only time the two types of companies contact one another is when the insurance policy is up for renewal and the account is escrowed (meaning the mortgage company is responsible for paying the insurance premium). In a claim situation, the insurance company issues the check to the homeowner and the mortgage company. It is the mortgage company's job to endorse that check and issue it back to the homeowner that abides by the loan agreement. When the insurance company only issues a certain amount of money to compensate for the damages, this has NOTHING to do with the mortgage company. If anything, the mortgage company wants the insurance carrier to send as much money as possible to protect their investment.
The Actual Process
Different mortgage companies abide by different individual policies, but they all kind of share similarities. To begin, the insurance company issues the check payable to both the homeowner and mortgage company. It is the homeowner's responsibility (unless they advise the insurance carrier to send the check straight to the mortgage department) to get the mortgage company to endorse the check. They must contact the mortgage company and get the address to send the check, and regular mail can sometimes take 7-10 business days.
Some mortgage companies have endorse and release limits pertaining to the claim. For example, let's say that you receive a check for $11,000, but the mortgage company's endorse and release maximum is $10,000. Because the check is over $10,000, the mortgage company will release the funds a portion at a time. That portion can sometimes be 1/2, sometimes it can be 1/3, depending on the mortgage company.
Also the fund disbursement depends on the status of the loan. If the loan status is not current (meaning that you have not made a mortgage payment on the due date), then no matter how much money is issued from the insurance carrier, the mortgage company will release the funds a portion at a time.
Processing times can have a huge effect on the speed of your check. Because mortgage companies handle claims from all around the U.S., the time must be allowed in order for each insurance claim to be taken care of. The following list outlines the aspects of the claim process that can hold up the funds:
- Sending documents/checks regular mail (which can take 7-10 business days)
- Faxing documents back and forth (usually 1-2 business days for processing)
- Overnight mailing (which really isn't "overnight", depends on the mail carrier. up to 4 business days)
- Payee draw requests (depends on the mortgage company, sometimes 3-5 business days)
- Inspection request (depending on the mortgage company, can take 3-5 business days to find an inspector in the given area)
- Inspection results (can sometimes take 2-3 business days to get back to the mortgage company)
Although processing times should be allowed, sometimes this is not the case for the funds not being released. The department in the mortgage companies that handle the release of the checks handle claims all around the U.S. Sometimes things get overlooked and funds get held. For example, you may fax a document that is needed for the fund disbursement. The system may reject the document, therefore holding the funds. The homeowner calls in, and after a second look at the document, the system made an error and the funds were held. Next the mortgage company must go in and manually process the document, the homeowner must allow up to five business days for the draw request, and the check will be sent regular mail which takes 7-10 days (unless the homeowner sends a prepaid overnight mailer).
Sometimes documents are not filled out correctly by the contractor, thus setting back the release of the funds. When that happens, the contractor must wait for the mortgage company to send more copies of the documents so they can filled out correctly. Then the contractor send the documents back and allow time for processing.
In some cases, additional documents may be needed. For example, if the homeowner had a module home that was lost in a hurricane and then purchases a new one, the homeowner must provide a pre-appraisal form so that the value of the new home can be compared to the value of the old one. The form can be obtained by visiting your local county office.
Mortgage companies aren't trying to steal your money. They are simply trying to protect their investment in the property. Sometimes funds for insurance claims don't get to you as quickly as you would like, but this is only because of things such as processing, documents not being filled out correctly, mistakes by the mortgage company, and the need for additional documents. It is your responsibility as a homeowner to keep track of your claim by contacting the mortgage company in a timely matter (or by hiring a lawyer or public adjuster to handle your claim). Your loan agreement with your mortgage company outlines the way that the company handles your insurance claim. Just remember, read everything before you sign the line and as a homeowner, you are responsible for keeping track of the release of YOUR funds for YOUR repairs.