Can my mortgage company force me to do repairs with check received from Insurance Co.

UPDATED: Feb 16, 2016

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UPDATED: Feb 16, 2016Fact Checked

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Asked February 16, 2016

1 Answer

Yes, they can. Most likely, clause five of your Deed of Trust says that you have to use the money to rebuild.

Under Texas law the insurance money goes first to the mortgage company, (even though you made the premium payments). When writing a loan in Texas, mortgage companies use the property itself as collateral and require you as the borrower to carry homeowners insurance. This automatically makes your lender the co-insured on the policy, and they can require you to either repair or rebuild. The main reason for this is to protect the mortgage company from a lender disappearing with the insurance money, leaving them (the lender) with a damaged and possibly unsaleable property.

The mortgage company will release the money to you as repairs or rebuilds are done. What a lender cannot do is hold ALL of the insurance money. Under Texas law, they must release it all or in part, within ten days, or else explain in a letter why they are not, along with clear instructions on what you must do to get the funds released. This is found in Texas insurance code 557.02 and 557.03

Please see the following for more detail:"

Answered February 17, 2016 by MattyMelt

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