Navigating property insurance claims can sometimes feel like a maze, particularly when claims get extra attention from mortgage companies. This usually happens with certain kinds of claims that the industry calls monitored claims.
When a mortgage company decides to monitor a claim, it means they're going to look at everything more closely and follow a bunch of specific steps. Let’s take a look at why this happens, the steps you may go through as a property owner if and when it does happen, and how to get paid as fast as possible.
This article also includes insight on monitored claims that can better equip property restoration professionals with the information they need to help property owners navigate the process.
About 60% of the time, mortgage companies endorse their part of an insurance claim check and send it right back to the homeowner, according to United Policyholders – a non-profit organization that helps consumers navigate insurance-related issues in all 50 states.
However, when a claim exceeds a certain threshold, typically around $40,000, or if the homeowner/property owner has a history of missed payments, mortgage companies pay closer attention to protect their asset – the house.
When a claim is labeled a monitored claim, it means that the mortgage company is taking extra precaution with the settlement money to make sure your house gets rebuilt or repaired. This helps protect you from untrustworthy contractors who may run off with your money. And it helps protect them by ensuring the repairs are made.
The process, which is a bit more rigorous than a standard claims process, involves inspections at various stages of work completion before more funds can be released. In addition to inspection documents, you might also be required to provide documents like estimates and receipts to the mortgage company.
For example, if you have an insurance settlement that’s $50,000 total, instead of endorsing the check and sending it right back to you, the mortgage company puts the funds in escrow. They send an initial amount and then release the rest of your funds in increments as the work on your house is completed and inspections are done to make sure the work is up to par.
When you file a home insurance claim, your insurance company sends checks for each category of damage. For example, if you have a total loss, you would file a claim that includes dwelling coverage, personal property, and additional living expenses. And you’d get separate checks for each part of the claim.
However, your mortgage company only has a vested interest in your house. So your check for additional living expenses and your personal property will only be made out to you. The check for your dwelling coverage claim will be made out to you and your lender. This is the portion of your claim that could be put into escrow and monitored.
Mortgage companies monitor certain insurance claims, particularly larger ones, for several reasons:
This oversight helps maintain the integrity of the property and the security of the mortgage company's investment.
Understanding the difference between standard and monitored property insurance claims is important.
Standard claims usually have a simple process, requiring only basic documentation and a few inspections. However, closely watched claims are more complex and go through several inspections to check the progress before more money is given out.
Compared to closely monitored claims, there’s even minimal paperwork involved.
The homeowner files a property insurance claim.
The insurance company completes the claims process and sends a check for payment.
The homeowner sends the check to the mortgage company for endorsement.
The mortgage company stamps their endorsement and mails it back to the property owner.
The homeowner deposits the check, which may be subject to a 7 to 10 business day hold from their bank to ensure the funds clear.
Once the funds clear, the homeowner disperse the funds as required.
Claims that your mortgage company chooses to monitor require additional documentation such as contractor agreements, insurance adjuster’s worksheets, and detailed repair estimates.
These more detailed claims typically also include:
In more scrutinized claims, mortgage companies typically release payment in stages to ensure proper use of funds. The initial payment is a fraction of the total claim value, with subsequent payments made upon satisfactory completion of work stages.
Key points in the mortgage company payout process:
As an example, say you have a claim payout of $100,000, your mortgage company may release 25% of the total amount ($25,000) initially. This payment goes to the contractor to get the work on your home started.
Once the first round of work is completed, the home is inspected and the inspection paperwork is sent to the mortgage company. Once that’s verified, the mortgage company releases another 25% of the claim money from the escrow account. THis continues until the final payment is made and the work is completed.
It’s common for homeowners and property restoration contractors to worry about having a claim that’s monitored by the mortgage company for several reasons, including:
However, it’s important to keep in mind, while these are valid concerns, the process isn’t overly complicated and goes smoothly in most cases. Help is available!
Understanding the nuances of monitored claims can demystify the process.
Each party involved in these claims plays a critical role:
Property Owners. Must provide documentation and schedule inspections.
Contractors. Need to submit detailed work agreements and follow up on payments.
Mortgage Companies. Need to respond promptly to inspection documentation and payment requests.
Public Adjusters and Attorneys. Often navigate around being removed as payees and manage legalities.
Keep all your documents, such as repair estimates and contractor agreements, in order. Staying organized will make it easier to provide necessary information quickly.
Regular communication with your insurance company, mortgage company, and contractors is key. Promptly respond to requests for information and ask questions if you're unsure about any part of the process.
To avoid delays, schedule property inspections well in advance – seven to 10 days before each round of work is completed is ideal. This ensures that the mortgage company can get the documentation they need and release further payments without unnecessary holdups.
Familiarize yourself with the claims process and what’s expected at each stage. Knowing what to expect can reduce stress and help you navigate the process more efficiently.
Don't hesitate to seek help from a public adjuster or legal professional if the process becomes overwhelming or complex. They can provide valuable guidance and support throughout your claim.
Ultimately, property owners and contractors don’t need to fear a mortgage company’s claims monitoring process. As long as everyone does their part in a timely manner, the process ensures the work on the home is completed and everyone’s happy with the outcome.
iink helps property restoration professionals and property owners save time and get paid on property insurance claims. Contact our sales team to see what your options are.