Homeowners mortgage company is fusing to sign the mitigation check from the insurance company with my name on it.

1 year ago

Completed the job on July 10, 2019. State farm included the mortgage company name on the check along with mine. Mortgage company will not sign the check. What can be done?

Senior Legal Associate Levelset
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When an insurer issues a check to both the property owner and the mortgage company, it’s not uncommon for to mortgage company to try and keep the check for themselves in some situations – particularly when the owner has fallen behind on payments.

It might be helpful to try and discuss the matter calmly and thoroughly with the mortgage company. If the check requires both parties to endorse it before it could be deposited, then the mortgage company won’t get much use out of it either. So, discussing why it’s being withheld and what steps can be taken to have that check released would probably be a good first step.

Recovering payment if the mortgage company won’t cooperate
Insurance payments often come slowly, and unfortunately, contractors can’t always rely on promises of future payment. Waiting to take action – one way or another – can really hurt the cash flow of a business and even result in the loss of some rights.

A good first step when payment problems arise might be to make sure that all of the necessary parties fully understand the situation. If the owner, insurer, and mortgage company are all aware that the contractor is suffering due to their inability to release payment, they might be more inclined to do the right thing and make sure payment is released. A friendly invoice reminder and/or letter might be a good jumping-off point before resorting to drastic action.

But, if a payment dispute persists, sending something a little more threatening – like a Notice of Intent to Lien – to those parties might get the message across. A Notice of Intent to Lien acts like a warning shot. It lets everyone know that the payment dispute is serious and that, if push comes to shove, the contractor is fully prepared to do what it takes to get paid. Considering a mechanics lien would affect both the property owner and the mortgage company, that might be a helpful step for forcing payment. More on that here: What Is a Notice of Intent to Lien and Should You Send One?

Finally, if discussions and warnings aren’t enough to get the job done, it might be time to take a little more drastic action. When unpaid for construction work, filing a mechanics lien is typically the most powerful tool available. When a mechanics lien is filed, that lien threatens the owner’s title to the project property (which, in turn, can threaten the mortgage company’s investment in that property). As a result, an owner and a mortgage company will generally want the mechanics lien resolved before the dispute gets out of hand.

While it’s unfortunate that an owner might face a lien through no fault of their own, the fact of the matter is that mechanics liens have a strict deadline. If that deadline isn’t followed, the construction business could lose its best payment recovery tool forever. So, even though an owner might not necessarily be the one responsible for payment, putting pressure via a mechanics lien might still be appropriate and even necessary. More on that here: Do You Still Have Lien Rights If Someone Besides the Owner Is Paying for the Work? For more info on Maryland’s specific mechanics lien requirements: Maryland Mechanics Lien Guide and FAQs

Of course, keep in mind that there are other options outside of the mechanics lien process that might be useful. More on those here: (1) Don’t Want to File a Mechanics Lien? Here Are 5 Other Options; and (2) Can’t File a Lien? Here Are Some Other Options For Recovery.

Lastly, here are some resources that I think will be valuable:
(1) What if a Morgtage Company Won’t Release an Insurance Check? (Owner’s Perspective)
(2) The Payment Perils of Property Restoration Companies
(3) Waiting on Insurance Proceeds To Get Paid? Get Security With A Mechanics Lien

Disclaimer: The information presented here is not legal advice and should not be construed as such. Rather, this content is provided for informational purposes. Do not act on this information as if it is advice. Further, this post does not create any attorney-client relationship. If you do need legal advice, seek the help of a local attorney.
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