How to Deposit an Insurance Claim Check With a Mortgage Company
Learn to effectively handle insurance claim checks made out to both you and your mortgage company for home repairs.
Receiving an insurance claim check after property damage can be a relief, yet discovering your mortgage company’s name also appears on the check can introduce confusion and complexity. This situation is common, and it requires specific steps to ensure the funds are properly disbursed for repairs.
Understanding the Joint Payee Check
A homeowner’s insurance claim check frequently names both the homeowner and the mortgage company as payees. This practice stems from the mortgage company’s “insurable interest” in the property, meaning they have a financial stake and would suffer a loss if the property were damaged. Since the home serves as collateral for the mortgage loan, the lender has a vested interest in ensuring the property’s value is maintained and any damage is properly repaired.
The inclusion of the mortgage company on the check protects their investment by preventing a homeowner from using the funds for purposes other than repairs. This ensures the lender is not left with a damaged asset that may no longer fully secure the loan. Mortgage agreements typically require homeowners to maintain insurance coverage that names the lender as a co-insured or additional loss payee, ensuring insurance proceeds are managed to restore the property.
Preparing for the Mortgage Company Process
Before contacting your mortgage company, gather all necessary documentation. Do not attempt to sign or deposit the check. Collect all relevant insurance claim documents, including the claim number, the insurance adjuster’s report, and details of the initial settlement.
Next, compile your mortgage account details, such as your loan number and the mortgage servicer’s contact information. Obtain detailed repair estimates from qualified contractors. These estimates should itemize the scope of work, materials, and estimated costs. A proposed repair timeline can also be beneficial, demonstrating a clear plan for restoration.
Submitting the Claim Check
Once prepared, engage with your mortgage company’s specialized department, commonly referred to as the “Loss Draft” or “Property Damage” department. Contact them to inquire about their specific procedures for handling insurance claim checks.
The mortgage company will typically provide their own specific forms, often called a “loss draft packet,” for you to complete. The information gathered during your preparation, such as contractor estimates and the adjuster’s report, will be used to fill out these forms. You will need to endorse the check by signing your name as one of the payees. The mortgage company will also need to endorse it before the funds can be processed.
After completing all required forms and endorsing the check, send the original check and the packet to the mortgage company. Use a secure method, such as certified mail with tracking, and retain copies of all submitted documents. Upon receipt, the mortgage company will usually deposit the check into an escrow or restricted account. The funds are held to ensure the repairs are completed as intended.
Managing Fund Disbursement for Repairs
After the mortgage company has received and processed the insurance claim check, funds are typically released in stages. This staged disbursement ensures repairs progress as planned and funds are used appropriately to restore the property. Mortgage companies often release an initial percentage of the funds, perhaps 25% or one-third, to help cover upfront costs like materials.
Subsequent releases of funds are contingent upon the completion of specific work milestones. Common requirements include submitting contractor invoices, signed lien waivers, and sometimes progress inspections. A lien waiver is a legal document signed by a contractor or supplier that waives their right to place a lien on the property for the amount they have been paid. Mortgage companies may also send their own inspectors to verify the work’s progress and quality at various stages, such as 50% or 75% completion.
The final release of funds occurs once all repairs are completed and a final inspection, if required, has been passed. Maintain open communication with the mortgage company throughout the repair process. Providing updates and responding to requests for documentation or inspections can help avoid delays in receiving the necessary funds.