What rights does a homeowner have when a mortgage company refuses to release an insurance check to the homeowner for hail damage?

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Jeffrey Johnson is a legal writer with a focus on personal injury. He has worked on personal injury and sovereign immunity litigation in addition to experience in family, estate, and criminal law. He earned a J.D. from the University of Baltimore and has worked in legal offices and non-profits in Maryland, Texas, and North Carolina. He has also earned an MFA in screenwriting from Chapman Univer...

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UPDATED: Apr 18, 2012

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Insurance Question from Kingston Springs, TN

Asked on 04/18/2012

What rights does a homeowner have when a mortgage company refuses to release an insurance check to the homeowner for hail damage? We had major hail damage on March 2. Our insurance company issued us a check for roughly 1/2 the damages. The check was, also, issued to the mortgage company who refuses to sign a release to us. We cannot make the necessary repairs without this money. I HAVE the check. Can I take the check make to the insurance company and have them issue checks directly to the companies scheduled to make the repairs?

Answer given on April 21, 2012

When the insurance company issues a claim check for repairs to the home, they must include the mortgage company on the check if it is made payable to the homeowner. The mortgage company may be concerned that if they sign the check then you won’t make the repairs to the home. It is unlikely the mortgage company will be willing to issue checks to the contractor as the work progresses.If you have a contractor signed up to do the repairs you can ask the insurance ocmpany to reissue the check to the contractor. The amount they are issuing at this time is probably the actual cash value of the damages, and will pay the full replacement cost once the repairs are made. Again, at that time you should ask them to make the check payable to the contractor. The contractor should have no problem with this arrangement, nor should the insurance company.

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