An article in the Insurance Journal reports that Countrywide Mortgage is being investigated by the Louisiana Attorney General for delays in processing insurance checks. Countrywide says that they had so many claims that they were backlogged, but they have now fixed the problem. Good for them, but many of you may be asking yourselves why this matters. Good question.
When your home is damaged, or your business, the insurance company will write an estimate. You then hire a contractor. But, your mortgage company is listed as a “loss payee” on the policy. That means that they are entitled to be on any check that the insurance company sends you for damage to your property. Why? Because they have an interest in making sure the property is repaired.
So, if you have a $50,000 loss, the insurance company will write a check to “Joe Homeowner and ABC Mortgage.” The check is sent to ABC Mortgage (or sometimes to you). When the repairs are done, you call the mortgage company and tell them that the repairs are done. They may send someone out to inspect and then they will sign off on the check and send it back to you.
Now, on some smaller losses, under $5,000 or so, the insurance company may issue the check just to you. But, anytime you have damage to your house, ask the insurance company how they will be issuing the checks.