09-09-2020, 04:54 PM
Every mortgage has a lien against the property as security, even if you only owe a dollar. This means that the bank does not literally own the property, but the lien means you cannot do anything with the title without their signature. (This is why when you pay off a mortgage they need to sign off when you change the title with your county.)
In practice, insurance proceeds attach to the property not to you personally so it gives any lien holder a kind of property right to be made whole FIRST. This is generally true for any secured loan.
A reasonable mortgage holder wants to insure that you put the money back into the property to retain value and protect their loan. However, some property owners would be happy to take the money and walk away leaving the lender holding the bag. The risk of this means that the lender's minions are terrified and want to hold the funds. In many cases they want you to fund the work, then submit receipts so they know you are rebuilding.
It sucks, but that is what the contract says in every case. And if you have a second or a HELOC others participate as well.
In practice, insurance proceeds attach to the property not to you personally so it gives any lien holder a kind of property right to be made whole FIRST. This is generally true for any secured loan.
A reasonable mortgage holder wants to insure that you put the money back into the property to retain value and protect their loan. However, some property owners would be happy to take the money and walk away leaving the lender holding the bag. The risk of this means that the lender's minions are terrified and want to hold the funds. In many cases they want you to fund the work, then submit receipts so they know you are rebuilding.
It sucks, but that is what the contract says in every case. And if you have a second or a HELOC others participate as well.