June 27th, Omaha, NE sustained substantial Storm Damages. My Insurance Company (State Farm) responded quickly & efficiently with mutually satisfactory & equitable reimbursement Check. As my house (~140,000 value) had an existing Equity Loan (~$34,000 balance), the standard Check was issued to Joint Payees.... myself and US Bank, thus requiring joint endorsement.
During that period waiting for final Re-imbursement, various repairs, cleanup, Contractor estimates, had been underway. Cashflow was from personal funds awaiting Insurance. When this check did arrive I approached the Lender (US Bank). After a frustrating 1-1/2 hrs with their associate and Corporate Office, the result was that "their Policy" was not to release Any or All of these funds until "All Repairs were Completed to their Inspectors Satisfaction"!!!
Now to complicate matters (or insult), this financial institution 'Mandated' that they would hold the check (w\ my endorsement), whereas they would create a 'Credit-Line Escrow Acct' with them being the 'Self Imposed Mgmt Oversight' and issuing agent for any and all contractor Invoiced Payments. Stipulations though, that before any Invoices shall be paid "Their 3rd party Inspector shall site review(s) for progress of completion and quality of work". Until Inspector approved - No Payments!! Once ALL designated damage repairs were confirmed then and only then would any of the Insurance Proceeds would be dispersed.
When queried about 'Credit-Line Interest', cost of their management oversight 'fees', and costs of their 'Inspector', their Corporate would not disclose or define but did imply that costs would be assessed against the held Insurance Funds. Inspector... vague, maybe $25/trip or maybe more depending on his involvement?? I may be dense but sure appears this greedy Institution is feeding off the distressed situation to 'get a piece of action'. Meanwhile only recourse is to have the home-owner front-end all costs or 'roll-over' to the banks manipulative scheme!!
In frustration, I even offered to have 100% of the Insurance proceeds be applied to the existing Note... still a NO until all repairs completed & Inspected. OK - What if I just paid off the entire loan? Still refused to endorse with the 'Logic' that the Check had been issued prior while a Mortgage/Loan existed thus still must confirm all repairs completed (to their satisfaction). This Bank 'claims' these policies are required by the Insurance Industry, due to the prior Sub-Prime situation, 'All Banks doing the same', etc., etc. but yet haven't discovered or substantiated any merit to their persistance!
Since then, I've conversed with my Insurance agent as well as a few other local Banks. None condones or familiar with these tactics. Even Institutions such as defunct Countryside Mortgage only requests that clients show 'Intent to Repair' via signed Contractor agreements, Receipts thus Incurred, etc. Likewise, I've encountered couple other homeowners relating the same 'roadblock' senario they'd had with US Bank.
Luckily, I have the financial means to pursue my repairs while just placing the Insurance Check on my back shelf (not in hands of some Bank). My concern is how many distressed families out there are being forced into unjustified addition costs and burden just because of some 'Vulture Bankers' picking the bones.