Hi, My name is XXXXX XXXXX I look forward to giving you the Answers and information to your questions and concerns. My goal is to provide you with Excellent Service. If I have not Answered your question completely, please let me know and I will be glad to explain further
1. "My mortgage company (loss draft department is telling me that I can not perform any of the repairs on my home due to the status of my loan. Is this legal?"
The mortgage company cannot refuse to endorse the insurance company's check in order to withhold the proceeds and apply them to your mortgage payments because that would be contrary to the bankruptcy rules and the Trustee will not allow one creditor to receive preferential treatment because of their claim. They must endorse the check so that you are able to make the necessary repairs in order to preserve your property;
2. "Can the mortgage company hold the overages of the claim money after the repairs have been made? "
The mortgage company cannot hold any overages of the insurance proceeds after the repairs are made because the mortgage company would be getting preferential treatment which is contrary to the Bankruptcy law. In Bankruptcy proceedings, preferences are not permitted and if the mortgage company attempted to keep the overages, the Trustee in Bankruptcy would compel the mortgage company to turn the excess funds either to the Trustee or to you to be used for payments under your Schedule of Payments which you will give the Trustee to approve;
3. "We had planned on replacing the sheetrock on the walls that were affected. The sizable amount of the floor repair money that we wont need will go towards those repairs. Can the chapter 13 trustee take those overages to pay to the unsecured debtors? "
In a Chapter 13 Bankruptcy, all the creditors, both secured and unsecured, are paid over a period of time and in accordance with the Payment Schedule which must be approved by the Trustee in Bankruptcy. After paying the cost of repairs to the areas of your house which were affected by the overflow of water, if there are funds still remaining from the insurance company's payment, you will have to account for that excess to the Trustee in Bankruptcy who will direct you to apply it to the payment of creditors pursuant to the Payment Schedule. But, the Trustee will not take the funds and pay only one set of creditors at the expense of the other creditors,
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Bonus and Positive Feedback on survey is very much appreciated,
thank you for your expertise Andera,
I have one clarification about the repairs. The mortgage company is telling me that I have to use a contractor for all repairs even though much of it I am able and qualified to do myself and could save a considerable amount of money. Can the mortgage company dictate to me that I must use a contractor?
Good morning, Michael,
The mortgage company may or may not dictate who performs repair work. It depends on the language contained in the Mortgage. That usually encompasses all the rights and obligations of both the lender and the borrower and by signing the Mortgage, you agreed to adhere to all of the terms and conditions imposed on you by that document. So, it might be a good idea to read through your copy of the Mortgage to see what it provides in the event of destruction of "part of the mortgaged premises and repairs thereto.......... ". If there is no requirement in the Mortgage, then you can speak to your lender with more authority and ask them to show you where and on what they base their authority to require you to use a contractor to repair the damage. I can understand if they had a requirement of using a licensed contractor for electrical or plumbing repairs, but in your situation, your repairs are to the floor and walls and no license is required for those repairs,
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I don't mind paying another $36.00 if you could please take a look at the section in my mortgage document under Insurance. It is only a couple of paragraphs long and doesn't say anything about having to use a contractor due to the status of my loan.
I would just like for an attorney to read the language and give it back to me in layman's terms.
Good evening, My apologies for not getting back to you sooner, but I was not online today until now. I read your reply and that would be fine, if you could either type the paragraphs you want me to look at, or scan the paragraphs and send them as an "Attachment" I would ask, though, that you apply that amount to a bonus because it looks better for me to the website. If that is agreeable with you, then you can apply the bonus, send the paragraphs, I will review them and have an Answer for you later on this evening.
I have a few clarifications I need on the legality of this FHA loan. In this clause it states that all insurance claim check are to be written to the lienholder and not the lienholder and borrower. I have yet to talk to anyone who has a mortgage that there loan doesn't have them listed on insurance claims along with the mortgage company.
The insurance company we have wrote the check payable to 1. Me 2. My wife, 3. the mortgage company. This went against the wy the loan reads. This mortgage company didn't make any issue of it being written this way.
Question: I endorsed the check as did my wife and sent it to the loss draft department where it has been since I sent it to them over a month ago.
If I am paying the insurance premiums what right does the mortgage company have to demand that they be the only payee on insurance claims?
Below is the exact wording under insurance copied and pasted from the loan document we signed.
Question: Other than this section I cannot find any other documents that refer to how insurance claims are to be processed. Is there somewhere I might be overlooking?
4. Fire, Flood and Other Hazard Insurance.
Borrower shall insure all improvements on the
Property, whether now in existence or subsequently erected, against any hazards, casualties, and
contingencies, including fire, for which Lender requires insurance. This insurance shall be maintained in the
amounts and for the periods that Lender requires. Borrower shall also insure all improvements on the
Property, whether now in existence or subsequently erected, against loss by floods to the extent required by
the Secretary. All insurance shall be carried with companies approved by Lender. The insurance policies and
any renewals shall be held by Lender and shall include loss payable clauses in favor of, and in a form
acceptable to, Lender.
In the event of loss, Borrower shall give Lender immediate notice by mail. Lender may make proof
of loss if not made promptly by Borrower. Each insurance company concerned is hereby authorized and
directed to make payment for such loss directly to Lender, instead of to Borrower and to Lender jointly. All
or any part of the insurance proceeds may be applied by Lender, at its option, either (a) to the reduction of the
indebtedness under the Note and this Security Instrument, first to any delinquent amounts applied in the order
in Paragraph 3, and then to prepayment of principal, or (b) to the restoration or repair of the damaged
Property. Any application of the proceeds to the principal shall not extend or postpone the due date of the
monthly payments which are referred to in Paragraph 2, or change the amount of such payments. Any excess
insurance proceeds over an amount required to pay all outstanding indebtedness under the Note and this
Security Instrument shall be paid to the entity legally entitled thereto.
In the event of foreclosure of this Security Instrument or other transfer of title to the Property that
extinguishes the indebtedness, all right, title and interest of Borrower in and to insurance policies in force
shall pass to the purchaser
Lastly - What exactly is a restricted escrow account and why are they set up. My understanding is that the escrow company is a third party who holds these monies to make sure that both sides are treated fairly. The escrow company is drawing interest off of these funds while they are sitting in their accounts. Do I have the right to ask for whatever interest is earned from the funds?
Good morning, Mike,
I was not notified by JustAnswer that you sent a reply and just came across it by accident. That is a very interesting insurance clause that your lender put in your loan documents and had you sign. Amazing what lenders get away with these days. I am sorry if you felt that something was lacking and felt the need to request a refund.
Have a great weekend,
Nothing was lacking, I didn't receive an answer to the last question and the payment was supposed to be in the form of a bonus and I got charged for rating your service twice. I still would like your view on this matter.
I still have intentions on paying your bonus upon receipt of an answer.
I don't have anyone else to turn to.
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