Home>Levelset Community>Legal Help>Hello- Why would a Mortgage Broker(Ditech) hold in escrow an insurance check after work on a damaged home was completed in a professional & timely manner? This company keeps making excuses about why they have not forwarded the insurance check back to the homeowner to pay the contractor for his services. A Mechanics Lien was filed, but it appears Ditech is in the process of selling the mortgage to another mortgage lender.

Hello- Why would a Mortgage Broker(Ditech) hold in escrow an insurance check after work on a damaged home was completed in a professional & timely manner? This company keeps making excuses about why they have not forwarded the insurance check back to the homeowner to pay the contractor for his services. A Mechanics Lien was filed, but it appears Ditech is in the process of selling the mortgage to another mortgage lender.

West VirginiaMechanics Lien Payment Disputes

A Homeowner received damaged to his roof from a storm. The insurance provider sent an adjuster out to access the damage & met with an contractor to who the homeowner hired. A contract was presented to the insurance company with an itemized bill from the contractor & all was agreed upon. The insurance company forwarded the check for the repair to the homeowner & was told the homeowner had to sign it & forward it on to the mortgage lender(Ditech). The contractor proceeded to complete the work in a timely manner using his own funds for supplies. The homeowner is the responsible party for paying the contractor, but has not received the check back from the mortgage company as they are sitting on it for some reason? It has been over 40 days now with no payment. The contractor has placed a "Mechanics Lien" on the property. Why is the mortgage company holding this payment up??? Thank you!!!

1 reply

May 9, 2019

I'm sorry to hear about your situation, and this is an interesting question. It's hard to be sure what a mortgage company's motives might be for withholding insurance payments for work performed. On one hand, if the mortgage company was in the process of selling the mortgage, they would probably want to do whatever it takes to free up the property title so that there would be no obstacles for selling the mortgage. On the other hand, where a lien has been filed, that might complicate the resale of a mortgage - and before that resale could take place, a mortgage company would likely need to be completely sure that all lien claims have been released or would be released upon receipt of payment. It's also worth considering that a mortgage lender might not be particularly worried about lien claims due to the priority considerations involved. When a mortgage is up to date and an insurance claim is small, generally, it's not too much of a hassle to have payment released by the mortgage company. However, when it's a large claim, or when a mortgage is delinquent or in default, it's not that uncommon for a mortgage lender to withhold insurance payments, at least for some extended amount of time. In a worst-case scenario, insurance funds might even be paid toward the mortgage (though this rarely occurs). When a mortgage lender is sitting on an issued insurance check, and when that nonpayment is causing serious issues (like a mechanics lien), it's a good idea to keep the contractor informed about what's going on. If they understand that payments are being slowed down by the mortgage company, and not the insurer or the owner, they might be less inclined to pursue legal action against the owner. Further, it's important to make every effort to discuss the matter with the mortgage lender and to ask for steps available to have the funds released. In some cases, a lender's failure to provide a path for obtaining insurance payments might even result in liability to the owner. But, considering this delves heavily into insurance and mortgage laws in West Virginia, it's probably a good idea to consult with a local lawyer more familiar with both insurance laws and mortgage regulations in West Virginia. They'll be able to provide further insight, and they might have advice on how best to avoid further issue. For some insight into similar payment struggles with mortgage lenders and insurers, this resource should be helpful: Why Is My Mortgage Company Withholding My Home Insurance Claim Settlement Money?

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