Damage from April 16th Tornado in Raleigh

Insurance Claims: Nightmare’s await Homeowners

Your home has been damaged by a tornado, flood, a tree fell on it in the recent Hurricane. Or as in my case when Mrs. Cobos  left the water in the upstairs bathroom running and flooded the second floor causing water to seep through to the ceiling below.

Tree Falls on House and Destroys it - Storm Damage - Raleigh North Carolina 2011
Storm Damage from April 16th Tornado in Raleigh

You’ve settled your claim with your home owners insurance agent and you have an insurance settlement check but it’s made out to you and your mortgage company;

How do you cash your Homeowners Insurance Claims Check to Pay for the Repairs?

Since the storms that rampaged across the country  in April  and May I have received numerous   calls from customers of the bank where I work requesting assistance processing insurance claims checks in order to pay for storm damages to be repaired. Hence this post for those who have questions about the process.

137 thoughts on “Insurance Claims: Nightmare’s await Homeowners”

  1. I had my insurance company to re-issue my two checks totaling 70k however my house has been foreclosed and was sold in auction. The checks are made out to me and mortgage company. since the house has been sold already and bank got his money, can i have them endorse the checks and how can i do that?

    1. Unless the proceeds from the sheriff’s sales was sufficient to pay off your indebtedness and any legal fees there’s not a chance in Hades that your mortgagee will endorse those check. You would be better off sending them the checks because it will reduce any future liability you might owe.

  2. How is it that I pay my own house insurance and I had a flood, which cause me to file a claim. The check is made out to me and my mortgage company. Which I must endorse to them and they will hold the check sending me half now half when the job is done. How is this when they don’t pay my homeowners insurance. How can they just step in and do this?

  3. we moved to SC and house was up for sale and they FINALY just released the check. They were told we left the heat on but still went and hired Aim Your Way Llc to distroy my home

  4. Coldwell B, what happened is that i saved a substantial amount of settlement about 3/4 since i got licensed contractor who is a long time friend and waived labor. They authorized water mitigation check, and contractor check and they still need to give me back about 30k from that money, from which i still have to pay adjuster fees. After i was promised otherwise and having them warned about my intentions to save money while still doing a nice job, now they are saying that they will only release amounts on invoices. I explained that the repair is done 100% , that i have no more invoices, and that the total received by insurance was just a settlement of the case prior to litigation. About 40k. I’l be honest i did a lot of help on the repairs but everyithing came out nice and checked out in the inspection which i requested as a final one, i never requested a 50% inspection. I have to see my attorney next week but just like you she says that she has never seen that before in her many years of litigation, especially when 100% loan history. I feel helpless against those people, they are rude and i feel fooled with and extremely upset. where can i find this info since i m in Florida. I appreciate your help and your time, thank you

  5. Have competed the repairs 100%, never a late mortgage payment, i am up to date in everything, including escrow. The repairs are done and the still wouldnt send me the remainder of the settlement check. They argue that they will only release the same amount used in the. Repairs of the water damage. I already talk to my attourney and i am waiting for advice.

  6. I’M a roofing contractor in Kansas City. We had a major hail storm in 2011 and we did many insurance claim jobs. I found Wells Fargo to be very hard to work with. They wait up to 3 months to release final check. This causes problems for contractors as they have to wait for their profit and payrołl.

    Statefarm was much easier to work with.


      1. I am going through absolute hell with Wells Fargo Home Mortgage. Wells Fargo hired a company to winterize my home while it was on the market to be sold and we moved to the South. Well, It wasnt winterized correctly which caused over $28,000 in damage. They refuse take any blame in the matter and yet sides with the company that caused the damage saying it was done right. Now they are keeping my Depreciation check due to delinquency on my account. They destroyed my home and prevented an actual sale of my home, caused us soooo much stress and yet they still continue to demand to hold OUR money. We were out $9300 out of pocket expense and this is the way they run things. This is why WF is ALWAYS being taken to court.

        1. Wow – you’ve managed to shock even me. I’ve never heard of a lender taking it upon themselves to winterize a persons home unless that home had been abandoned. You said your depreciation check was retained by Wells Fargo to cover your arrearages. Was your home in foreclosure?

          1. Mister Cobos- Question for you, i have a good problem on my hands. We had flooding in our home and the insurance company is cutting me a check $3k MORE than what my contractor is charging. My insurance company will cut an initial check and with hold $900 until I send proof of cleared payment from the contractor. Can i pocket the difference or will i need to return the balance to my insurance company? THANK YOU!

  7. Mr. Cobos, I’m wondering if you have any experience with a situation such as the following:

    We had a tree fall on our house in December of 2012. The tree was dead and fell from my neighbor’s yard into ours. Fantastic neighbor – he offers to cover it with his insurance, but we decide to let each of our insurance companies figure out responsibility. The tree did some structural and cosmetic damage to the exterior and interior of our garage (and bonus room above.)

    My adjuster came out quickly and cut me a check on the spot, minus my $2500 deductible. I happened to be in the process of doing some home improvement, so I had the same contractor bid on the work, and his bid was about $1000 over what the adjuster estimated. They haggled and the claims adjuster raised his estimate by about $700. I contacted the adjuster about getting a check for the difference, and he said that check would be not be cut until the repairs were completed. (I can see the mortgage bank not wanting to release the funds, but the insurance company?)

    In any case, since I did not have the deductible in hand, I had the contractor fix the structural work, and the exterior cosmetic, but was going to hold off on the interior cosmetic unless/until my neighbor’s insurance took responsibility. Well they did, as I just got a notice from my insurance that I will be receiving a check to cover the deductible. (But only the deductible.)

    So my questions are these (and I really want to do what’s ethical, not just borderline legal):

    1) Since my neighbor’s insurance is covering the loss, does my insurance company have the right to withhold cutting me a check for the additional $700 from the adjusted estimate?
    2) Am I obligated to use the $2500 and/or $700 to make the cosmetic repairs in the estimate? I will be adding a dormer to the bonus room in the foreseeable future and can’t see doing work that will just get ripped out.
    3) If I am obligated to use the $2500/$700 for cosmetic repairs, and don’t want to, do I need to contact my neighbor’s insurance company to make sure they have not over-reimbursed my insurance?

    Thanks in advance

    1. Tad

      You may have noticed that I seem to get the same two or three questions or a rendition thereof asked repeatedly so it is refreshing when I receive a truly unique question such as yours. I actually reread your question more than once to make sure that I fully understood both the circumstances as well as the moral/ethical concerns that you are faced with.

      First, let me tell you that you are truly blessed to have such a great neighbor! They say that good fences make for great neighbors but I say it’s great neighbors who make great neighbors! Here’s the thing, yes, you should use all of the money to restore the home to it’s pre-disaster condition or better because that it what the purpose of having insurance is intended to do. Insurance protects the homeowner from having to write those checks in the first place. However, as a property owner there is nothing ethically binding you to repair, restore or improve the property on anyones timeline other than you own. HOWEVER, if there is a mortgage on the property, your mortgage aka deed of trust might have something to say about that, therefore I would recommend you read this post if you havent already and then review your own mortgage documents to see what you agreed to when you took your banks money to buy this home.

      That being said, you sound like a pretty honest fellow to me who seems genuinely concerned about doing what is right and so I am sure that with such a strong moral compass, you will do what is right, regardless. Therefore, if it is your plans to make major improvements to the home that would cause the cost of these cosmetic repairs to be wasted, then I recommend that as long as the repairs aren’t exposing the house to risk of further damages, which it sounds like that’s not the case, so long as you are current on your mortgage payment, which it sounds like you are, then I would say do what is right. Put that $2500/$700 to better use which would be by waiting to make the improvements that you are already planning which will likely have a greater positive impact on your homes overall than simply repairing the cosmetic damages that you are putting on hold.

      Think about it like this; if you were self insured and all things were equal would you make the repairs now, or wait until the project completes the need to work through that area?

      I hope that helps, thanks for the great question!

  8. dear mortgage guy,we were in the early stages of forclosure with bank of america,on april 16th they sold mortgage to resurgent on april 18th i had a major flood,when i called resurgent about flood claim how to handle insurance check,it probably 75 k in damages,i know this because we had same thing in 2008,plus a minor fllood every year since 2006,that is the reason why we decided to walk away from mortgage co.so resurgent informed me that will not reimburse me for any money i spent and would not reimburse for furnace,water heater clean up or appliances all which are covered by insurance,plus they want me to hire contractors for repairs,which im leery of because i dont want to be sued if they dont reimburse,any suggestions,were about 26k behind,thanks syl

    1. Syl – thanks for your question. Before I answer your questions tell me what your plans are with the house. Do you plan to work out the past due payments so that you can keep from losing your home to foreclosure?

      1. hello,we do not plan to keep due to the yearly flooding and the inability to sell because of so many floods,we have been here since 89 but are upside down,and value decreased from 260,000 to 90,000,but we do plan to stay for 6 months to 18 months and just need the basics,not really vested in a big overhaul of house,we did that in 2008 and was a nightmare to get reimbursed,and have flooded evey year since 2008,replacing the furnace,water heater and washer and dryer every year,im thinking its probably best to do nothing since mortgage company may like money over repairs,but certains things had to be done now,like clean up,and hot water tank,thanks syl

        1. OK, now I have a better grasp on what’s going on. First; recall from the original post, your lender is a party to the check because they have a vested interest in the property and judging from your comments, it sounds like they have a greater interest than do you at this point in time. Recall too that you have a contractual obligation to make the repairs as soon as possible in order to prevent further economic decay to the property. The twist here is that the same contract that impels you to keep the property in good working order is the same one that requires you to make payments every month as agreed in the Note that you also gave the bank.

          Because you are in foreclosure, the bank has no obligation that I’m aware of to release any of the insurance proceeds with the exception of those designated to replace personal property such as clothing, furniture and in some cases appliances. Each state has different laws concerning what does and does not constitute personal property. For instance, in North Carolina, a refrigerator is considered personal property, as is a stove, but a water heater is not. However,when there is both personal and real property loss, most insurance adjusters will normally issue two checks. One check will be issued directly to the homeowner(s) for their personal property loss while the second is issued to the homeowners(s) and mortgagee(s) as they may appear in title.

          Bottom line here is that as long as you are in foreclosure you should expect very little cooperation from your mortgage lender to release insurance funds for repairs because they would probably rather have their hands on that fat check and sell the house for what they can get for it. Your mortgage lender has probably already arrived at the conclusion that you plan on staying in the house rent-free as long as you can while the foreclosure process stretches out, but this flood has just hastened that timeline.

          It’s probably time to figure out how to get your mortgage current (without the use of the insurance funds) or start looking for a new place to call home because to start hiring contractors will only cause you more trouble when the bank decides not to release the funds to pay for the work.

          1. hello,to be clear,if i did any repair or replacement covered by insurance,the mortgage company is not legally compelled to reimburse and on the other side am i legally compelled to endorse check,,thanks for your time syl

          2. I cannot offer legal advice because I am a lender not a lawyer. You should consult an attorney for clarification of your legal responsibilities. The fact that you could face significant liability because of this foreclosure is reason enough alone to get legal advice.

            What I can tell you for sure is that if you don’t endorse the check and send it to your lender not only will you never get your home repaired but you will not accomplish anything other than establishing your unwillingness to do whatever needs to be done in order to protect and preserve your home from further damage.

          3. hello again, i do have a foreclosure lawyer who unfortunately has no idea on insurance claims and what to do,ive called him twice,i have spoke to fema,brokers,ins agent, and adjuster,no one seems to know an answer,you were my last hope,i am very willing to fix home and bring it to where it was,but like you said previously the mortgage company may not pay the contractors,then i can be sued,so im at an impasse,the house as is,is habitable,ive cleaned and had a contractor install a hot water tank,and we removed all debris,i love my house,all my kids have been raised here,but the constant flooding is just too much,we tried to sell but when you have had 12 flood claims in 22 years no one wants to buy,again thank you for all your time,syl

  9. Bottom line is that when you are not late on your mortgage payments (ever), the bank should not have the right to sit on any checks. We are experiencing the same problem with our mortgage holder. Correspondence after correspondence, phone calls after phone calls, same language same broken record BS daily without any results. As we speak, we are living on concrete. I even sent them cancelled checks, contracts etc. but I think you are talking to the walls. Everything is to their advantage. CROOKS

  10. On June 26, 2012, We had a house fire that was caused by our propane grill. RVOS Insurance adjuster came out on that Friday, June 28, 2012 and said that we would need to get at least 3 estimates for damages, that they no longer do initial appraisals. I notified my mortgage company (Wells Fargo) who we did not sign a loan with but they bought out our loan from another company. They sent paperwork of what we needed to do once we got insurance check. We ended up getting 5 estimates, it was so many because it took so long to get some of the first ones we contacted to get their estimates done that we thought they weren’t going to get them done so we contacted two additional ones. Our estimates were $112,000, $118,000, $140,000, $160,000, and $181,000. After two months and finally getting three of the estimates in we sent these to the insurance company after getting the final two estimates sent in the insurance company they wrote their estimate off of the estimates provided. A few weeks later the insurance company ask us what contractor we were going to use? We told them we wanted to see what they were going to appraise our estimates at. They told us the 160,000 and the 181,000 were too high. We had a problem with the $140,000 estimate, the contractor ended up playing golf with our adjuster and sent his estimate straight on to the adjuster without notifying us, so we refused to use him. So we chose the $118,000 who was a local contractor. The insurance then adjusted us at $118,500, but cut us a check to us and the mortgage company for approx. $96,000, keeping $21,000 for depreciated security. Once we got the insurance check and looked it over we noticed a lot of things like a brick wall that the fire had bleached out that was going to have to be replaced that was not accounted for in the insurance estimate. We notified our Insurance Adjuster to come back out and meet with us and our adjuster. We explained that there were some concerns that we had about some of the things not being in the insurance estimate. The insurance adjuster said that if it was in the contractors estimate that they would not pay more than the contractors estimate that we chose to go with. We sent in our check to Wells Fargo Property Loss Dept. (we are not or have never been behind on our mortgage payment and still have to make a mortgage payment every month). The mortgage company set it up in escrow and release it in 1/3 increments. The first 1/3 came in September. So finally 3 months after our fire and being out of our house we have the funds to get the contractor started. We rocked along and got the next 1/3 at 50% completion. We have called for a final inspection to release the last 1/3 and the inspector said we are 75% and they will not release the funds until 100% completion. Between the insurance company holding approx $21,000 and Wells Fargo holding $32,000 that is $53,000 that we need to finish our house and can’t. Our contractor is going have to pull his guys off our house next week if we don’t get the funds released. We told Wells Fargo in the beginning that the insurance company was keeping a depreciation to protect our and their interest, they said they were not concerned what the insurance company did they have a policy and that is what they do.

    1. I forgot to mention that our insurance company would only pay living expenses for 6 months from the time of the fire. So since I’m in the 7th month now we won’t have living expenses paid if we continue to be postponed.

  11. Hiring a public adjuster and/or an attorney will speed up the process dramatically. Both speak the same language as the insurance and mortgage companies and are familiar with the process. At the end of the day, everyone wants to move their workload along, get required documentation for the file, and close claims :)

  12. First floor of house ruined by Sandy,…here’s my issue… Third party Insurance Adjuster (hired by flood insurance company) determined that there was $64,000 of damage to my house. He then sent my file to the flood insurance company for final review. In the meantime (a month has passed since he did his initial visit), he sent me 2 checks. Each made out for $20,000 and specifically stated that these were advance checks to begin reconstructing the damaged property. I signed and mailed to my mtg company who was also listed on structure advance checks. During the first month I was hiring local contractors who were all asking for cash. 90% of contractors didnt want to hear about insurance they wanted cash or they moved on. So I was doing the construction with cash out of my pocket but did not obtain receipts.

    My credit union (mtg company) informed me that they could not cash my advance checks until I could provide them with the adjusters report and/or receipts from contractors. Unfortunately this was not a finalized document. Insurance adjuster spoke with mtg company and explained that these were advance checks and that they were only a portion of the setllement. However, until the claim report was signed off by the flood insurance company he could not tell the mtg company the final settlement amount that he put in for…he said that this could take a few months as they are all backed up.

    Mtg company told me they were sorry but they could not cash advance checks and that I would need to provide contractors invoices in order for them to release some of the funds…I tried to explain to them on several occasions that I didnt have money to pay contractors and that this was the purpose of the advance checks…They said well send a contractors estimate, I explained to them that I did..the contractor listed the scope of work and a single dollar amount….Credit Union said sorry they still could not provide me with advance money. That the contractors estimate was an estimate and not an invoice…..Is this legal? I thought that advance checks are for homeowners to use to start making their house livable….contractors arent doing the work and then waiting for insiorance companies and mtg companies to pay them…

    So now I have 75% of the work completed…all cash out of pocket….bank is still holding my money…I have told them to send an inspector down to confirm that the majority of work is done, send me some money…but they said you are only entitled to 1 home inspection and that is when all work is completed…

    I am going to have a contractor draft up one invoice and put down services rendered. Listing everything that has been completed and a $40,000 invoice….so a couple of questions….

    Is this legal what the credit union is doing with my advance checks? If a contractor sends me an invoice will checks be made out to me or to him? will credit union send contractor a 1099 so that he will have to pay tax? will the difference between contractors invoice and flood settlement be given to me? if so, will this be counted as income and I will pay tax? Thanks for your knowledge.

  13. I have been a victim of hurricane Sandy. I am awaiting my first advance check for repairs. My question is: If I get a total of say, $50,000 to do the repairs and it only costs me $45,000 (and it’s repaired to the satisfaction of the mortgage company) do they return the $5,000 to me? BTW I have a reverse mortgage.

    1. Rich - On the positive side of things, at least you only sustained $50,000 in damages and have a home to repair. I only hope that you didn’t lose any loved ones because so many people did. Anyway, I’ve answered a question similar to your question before in this thread and you can find a more detailed reply here;


      In a word the answer is Maybe. Under most circumstances you should be able to keep the excess money, however, because you have a reverse mortgage, essentially a revolving line of credit, it is a different agreement.

      Your security agreement will spell out the terms of how your lender will release those insurance funds to you in the section which is titled Hazard Insurance, or a variation thereof. Please check back with me and let me know if it says something different.

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  15. I received an insurance check made out to me and Suntrust who hold my mortgage. The amount of the check is 20k, which is more than the repair cost estimates I have gotten. I understand I have to file the necessary paperwork for dispersal of funds from Suntrust but when the job is completed, will Suntrust release the remaining funds to me?

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