This the cutting of red tape Obama championed during the election. Another election sound byte by the now infamous failed Commander in Chief. At least he has time to play golf with Tiger and take a lesson or two from Butch Harmon. We’ve known all along where his priorities lie. It certainly isn’t with his “fellow” Americans!
Banks have no incentive to release funds quickly because they are making a profit from the money held in escrow.
First the mortgage service company will only release 1/3 of the funds that they receive from the insurance company. I have found in none of my loan documents where they talk about only releasing 1/3. I’ll return to that in a minute. Most contractors want 1/2 up front so you will have to negotiate with them to get agreement to accept 1/3. Most savvy contractors do not like dealing with insurance claims that also involve the mortgage company because they know the payments are going to be slowed significantly. Good luck finding a reputable contractor who is willing to wait while that first payment is being processed. Be prepared to pay some of your own money if you want to keep the contractor on the job. My mortgage rate is 4.3%. I got a bridge loan and used credit cards at 12% interest. I got an interest payment for funds that were held in escrow at 0.5%. The mortgage company issued my credit card. Starting to get the picture?
You have to ask for the money released out of escrow to be express mailed or wired and you will get charged for it. Also, you get charged for the inspections that the mortgage company requires.
Back to the 1/3. In my case the insurance company made an initial payment of 1/3 which I forwarded to the mortgage servicer to put into escrow. When I asked for the funds to be released to the contractor guess what, they released 1/3 of 1/3 or 1/9. Contractor had already spent well in excess of that from his own funds and walked off the job until I scraped together enough to get him to the 1/3 he and I were promised. Everything takes at least five business days to process. Clock starts ticking for the bank when they receive the information or the funds. If they receive something after 2 o’clock on a Friday, they don’t count it as coming in until Monday. So the time is actually more than five days. Fail to give them all the documents they ask for and they send you a letter snail mail telling you what is missing. Do not expect to get phone calls or emails, you have to contact them.
Finally, what kind of recourse do you have? Not really much because the mortgage companies are allowed a great deal of discretion in how they perfomr their inspections and process their claims.
Here is a thought, take away the profit incentive to hold onto the money and the claims will probably get processed more quickly. At least require the mortgage company to pay interest on funds held in escrow at the same rate as the mortgage. If more than 30 days elapses between when the insurance payment is received and the first payment is issued out of escrow, increase that percentage to the banks highest credit card rate and apply it retroactive to when they received the funds.
Bottom line, the banks are already profiting on the mortage, they should not be allowed to profit on the insurance payment.
Could this be the reason for Christie’s recent rant?
And as pressure is puto on the banks, the checks are sped up, fraud and abuse will take over much of the money.
This the cutting of red tape Obama championed during the election. Another election sound byte by the now infamous failed Commander in Chief. At least he has time to play golf with Tiger and take a lesson or two from Butch Harmon. We’ve known all along where his priorities lie. It certainly isn’t with his “fellow” Americans!
Banks have no incentive to release funds quickly because they are making a profit from the money held in escrow.
First the mortgage service company will only release 1/3 of the funds that they receive from the insurance company. I have found in none of my loan documents where they talk about only releasing 1/3. I’ll return to that in a minute. Most contractors want 1/2 up front so you will have to negotiate with them to get agreement to accept 1/3. Most savvy contractors do not like dealing with insurance claims that also involve the mortgage company because they know the payments are going to be slowed significantly. Good luck finding a reputable contractor who is willing to wait while that first payment is being processed. Be prepared to pay some of your own money if you want to keep the contractor on the job. My mortgage rate is 4.3%. I got a bridge loan and used credit cards at 12% interest. I got an interest payment for funds that were held in escrow at 0.5%. The mortgage company issued my credit card. Starting to get the picture?
You have to ask for the money released out of escrow to be express mailed or wired and you will get charged for it. Also, you get charged for the inspections that the mortgage company requires.
Back to the 1/3. In my case the insurance company made an initial payment of 1/3 which I forwarded to the mortgage servicer to put into escrow. When I asked for the funds to be released to the contractor guess what, they released 1/3 of 1/3 or 1/9. Contractor had already spent well in excess of that from his own funds and walked off the job until I scraped together enough to get him to the 1/3 he and I were promised. Everything takes at least five business days to process. Clock starts ticking for the bank when they receive the information or the funds. If they receive something after 2 o’clock on a Friday, they don’t count it as coming in until Monday. So the time is actually more than five days. Fail to give them all the documents they ask for and they send you a letter snail mail telling you what is missing. Do not expect to get phone calls or emails, you have to contact them.
Finally, what kind of recourse do you have? Not really much because the mortgage companies are allowed a great deal of discretion in how they perfomr their inspections and process their claims.
Here is a thought, take away the profit incentive to hold onto the money and the claims will probably get processed more quickly. At least require the mortgage company to pay interest on funds held in escrow at the same rate as the mortgage. If more than 30 days elapses between when the insurance payment is received and the first payment is issued out of escrow, increase that percentage to the banks highest credit card rate and apply it retroactive to when they received the funds.
Bottom line, the banks are already profiting on the mortage, they should not be allowed to profit on the insurance payment.