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What Can I Do If I Owe More on My Flooded Home Than What an Investor Can Pay?

insurance to payoff mortgage

If you are a victim of the recent flooding caused by Hurricane Harvey, and if you happen to owe more on your house than what an investor can pay, there are a few things that you can do. One of the smoothest routes to take if you find yourself in this situation is to get flood insurance to pay the difference in payoff. In order to do this, there are a few steps that you need to take:

1. Report Your Loss

The initial thing to do is to report your loos to your insurance carrier. Make sure to note the date and time that the claim was reported. Notate the Claim Number and the Claim Adjuster’s name as well as their contact information

2. Claim Adjuster’s Worksheet and Estimate

Make sure to get a copy of this from your insurance company as soon as possible.

3. Contact the Mortgage Company’s Loss Draft Department

If you have a mortgage loan attached to the property, then the claim check will be sent to the Mortgage Company’s Loss Draft or Loss Claim Department. Both you and the Lender will need to endorse the check before the lease of the funds. Contact the Mortgage Company’s Loss Draft Department for additional information on procedures, instructions and requirements.

The below items are among the most common that are required by the Loss Draft Department:

  • Property owner’s authorization
  • Detail copy of the claim adjuster’s worksheet and estimate
  • Payoff estimate
  • Property owner’s instructions in writing stating how the homeowner wants the insurance funds to be applied
  • The mortgage company must have specific forms that the property owner is required to sign before release of the funds can be authorized
  • Copy of the real estate contract stating that the property is being sold “as is without repairs”
  • Two business days for the faxed or emailed documents to upload in the mortgage company’s document repository and 3-5 business days to process the request
  • The property owner can elect to authorize the release of the insurance repair check directly to the contractor or the purchaser if required to make the deal work

Other Items to Keep in Mind When Trying to Use Flood Insurance to Payoff a Difference Owed:

  • Keep in mind that after the claim check is issued to the mortgage company, that they will then issue a check made out to you as well as the contractor(s) that you are using.
  • You’ll most likely be inspected in increments and then receive a check at those increments, such as when 50% of the work is done, when 75% of the work is done, etc.
  • The lender will usually pay for the inspection when the work completed is at the halfway mark. The final payment is made after a final inspection that ensures the work is complete.

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