Can a bank recall a mortgage after a natural disaster?

UPDATED: Jan 15, 2012

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Can a bank recall a mortgage after a natural disaster?

Can a bank take back a mortgage on which I have always been current? There is a deterioation clause but house was destroyed by a hurricane (act of God). Insurance company has guaranted a rebuild amount far in excess of mortgage but bank seems to want to take the money (insurance money) and run leaving me with less than I need to rebuild my house. Can they legally do this?

Asked on January 15, 2012 under Real Estate Law, New Jersey


FreeAdvice Contributing Attorney / FreeAdvice Contributing Attorney

Answered 11 years ago | Contributor

Whether or not the lender on your home can recall the loan after a natural disaster depends upon the terms of the loan and security agreement even if you have been current on the loan. As such you need to carefully read the loan agreement and the security agreement in that the terms in these two document will most likely set forth what the lender can or cannot do concerning the insurance proceeds concerning the damaged home.

You might be able to qualify for a low interest FEMA loan to assist in the rebuilding of your home with any left over insurance money if your lender insists on getting the vast bulk of the insurance money for the home to pay off the mortgage.

IMPORTANT NOTICE: The Answer(s) provided above are for general information only. The attorney providing the answer was not serving as the attorney for the person submitting the question or in any attorney-client relationship with such person. Laws may vary from state to state, and sometimes change. Tiny variations in the facts, or a fact not set forth in a question, often can change a legal outcome or an attorney's conclusion. Although has verified the attorney was admitted to practice law in at least one jurisdiction, he or she may not be authorized to practice law in the jurisdiction referred to in the question, nor is he or she necessarily experienced in the area of the law involved. Unlike the information in the Answer(s) above, upon which you should NOT rely, for personal advice you can rely upon we suggest you retain an attorney to represent you.

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