Bill would create rules for mortgage companies holding fire insurance payments

BOULDER COUNTY, Colo. — Bret Fulton is picking out paint colors for his home being rebuilt after the Marshall Fire. Construction is nearly finished, and he plans to move in next month. 

But if you ask his mortgage company, the home has a lot more work to be done.

Fulton is one of many homeowners who’ve contacted Steve On Your Side trying to get their insurance money from stubborn mortgage companies holding on to the funds meant for rebuilding after the Marshall Fire. 

If a homeowner still owes money on their mortgage, the insurance company sends the check to the mortgage company, with the expectation that the mortgage company will slowly disburse the funds to help pay construction costs for the rebuild.

But the rules of such a process are hardly defined, and customer service units at mortgage companies appear understaffed to help homeowners navigate the maze to receive the funds. 

9NEWS has spoken to several Marshall Fire survivors who’ve had insurance money withheld even after inspectors hired by the mortgage company found significant progress with the rebuild. Last week, Steve On Your Side helped a Louisville Marshall Fire survivor get $125,000 from their mortgage company after the company insisted his home was only 5% completed.

RELATED: Marshall Fire victim struggles to get remaining insurance payout from mortgage company

The horror stories from Marshall Fire survivors have gotten the attention of state lawmakers, who are circulating a bill that would require faster payouts of insurance money, better customer service and a requirement for mortgage companies to keep the funds in interest-bearing accounts, crediting interest paid to the mortgagee’s account.

Fulton, who said he hasn’t yet received a payment from his mortgage company, said an independent inspector hired by the mortgage company reported to him his rebuild was 90% complete. But when he called loanDepot, his mortgage company, someone informed him the company decided the home was only 60% complete.

“Between the inspection service and the mortgage company, somehow our completion percentage went down to 60%,” Fulton said. “You know, it’s pretty hard to complete this without having money to pay our contractor.”

Fulton said he’ll have to tap into his retirement savings to make final payments to contractors while he waits for the nearly $600,000 being held by loanDepot that should pay for the project.

He said customer service representatives he’s spoken to are sympathetic to his situation, but say the process is working the way it should be. He said the company told him they were working on sending him a check for a fraction of the total amount.

“It seems to me like there’s something’s happening that they’re almost in some ways actively trying to suppress those numbers so that they don’t have to pay out,” he said.

LoanDepot, through a spokesman, declined comment for this story.

A legislative solution

Colorado HB24-1011, sponsored by Rep. Kyle Brown, D-Louisville, would require mortgage companies to sign off on a written plan to rebuild a home. The plan would have to include milestones that would require the company to disburse money. 

The bill would also require mortgage services to cut a check to a homeowner for any insurance proceeds that exceed the principal amount left on the mortgage, and would require the mortgage servicer to collect interest on the amount held and credit that interest to the borrower.

“You work with your insurance company, you fight for every dollar that you’re owed, you’re underinsured anyway,” Brown said. “And then when you finally are able to get some money from your insurance company, the check is made out to your mortgage company, and you can’t get access to that money in a timely way.”

Brown said the issue came to his attention at a town hall meeting in his district this summer.

“All of them had a horror story of one way or another that working with their mortgage servicers,” he said.

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