Superstorm Sandy survivors trying to rebuild their homes now have another roadblock to deal with—late insurance reimbursement checks.
A New York State Department of Financial Services investigation found that $200 million in insurance funds requested by hurricane survivors have yet make it to homeowners. As of Jan. 27, banks representing 95 percent of the state were withholding funds for 6,611 borrowers, totaling $208 million. And the four largest banks—Wells Fargo, Bank of America, Citibank and JP Morgan Chase—have yet to disperse 4,159 checks worth $131 million, according to the agency.
“After insurance companies have sent homeowners checks to pay for repairs, the money should not be sitting with the bank because of red tape,” Gov. Andrew Cuomo said. “Banks need to use maximum discretion to get money into homeowners’ hands as quickly as possible.”
In December, the state was successful in freeing up a portion of insurance funds from banks, but now officials realize that funds aren’t moving quickly enough into the accounts of those who need it, according to Department of Financial Services Superintendent Benjamin Lawsky.
“While we understand there are some limits on how banks release funds, we want to make sure that they are pushing those limits and getting insurance money out quickly,” he said. “We will work with Fannie Mae and Freddie Mac to reduce barriers to the flow of insurance funds.”
There are several factors that have contributed to the delay. For some homeowners, checks are issued jointly to them and their bank or mortgage servicer, which requires the bank to endorse the check before homeowners have access to it. Federal rules from Fannie Mae and Freddie Mac also stipulate that banks receive proof of repair work before releasing money to homeowners.
In response to the findings, the financial services department sent a letter to banks and mortgage servicers recommending that they provide easily accessible information on their websites describing the procedures required to release funds and to immediately release all funds designated by the insurance company as “emergency” or “advance” funds.