Can a bank recall a mortgage after a natural disaster?

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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

Answers:

FreeAdvice Contributing Attorney / FreeAdvice Contributing Attorney

Answered 9 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.


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