I’m supposed to be getting a settlement check for home repairs. Does my mortage company have any say in the process?

If you have a mortgage, it probably names the lender as a party on your insurance policy. This helps to protect the interests of the lender in the event of damages or destruction to the home. When you file claim for a covered peril, the home insurance company will write a check that both you and lender will have to sign before it can be cashed.

Even if you have mortgage insurance to protect the lender's interests, any claims for less than the destruction of the home are still going to require the lender's cooperation; this is because mortgage insurance only covers the lender's costs in the case of a total loss of the property. For less than a total loss, the lender needs to know that you will return the home to the condition it was in before the damages.

When the insurance company cuts a check for damages, you are able to find a contractor to perform the repairs. In some cases, the lender may still have the option of declining repairs from by your chosen contractors. This generally happens when the lender has had previous dealings with a contractor and the work was either not performed, performed inadequately, or resulted in additional damages. When this happens, you can still choose a contractor, but you will have to choose one that meets with the lender's approval.

In some cases, the lender or mortgage company may receive the checks for the repairs instead of you. If there was personal property involved in the claim, it will be a separate check, even though both checks may get sent to the mortgage company or lender. In this situation, contact your mortgage company and request that they release the check for your personal property. Since the lender does not have any claim on that portion of the check, they will usually mail or deliver the check to you, or allow you to come by a local office and pick it up. The personal property portion of the claim is yours, and sending it to the mortgage company is simply a common way of handling both parts of the claim in a single mailing.

Typically, the lender or mortgage company will deposit the money received into an escrow account until the repairs have been made. If your contractor requires an up-front payment to begin work, contact the lender and let them know. As long as the payment is only for a portion of the total cost of the repairs, your lender should not have any problem with making a withdrawal for this purpose. These rules have been developed by bank regulators to prevent abuse on the part of homeowners and lenders. If you have any problems or are not sure that process is working out as expected, contact the state banking department and request clarification.