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I work for a contracting company and recently we changed the roof on a house that was damaged by a storm. The insurance company sent a check to pay for the work done on the roof. The check was drawn out to the owner of the house and the mortgage company, the owner told the mortgage company to keep the money from the insurance settlement to pay for his past mortgage payments and now the owner has not paid us (the contractor) and the mortgage company refuses to hand over the proceeds to us (the contractor), when the roof has been completely repaired. Is this legal?

6 Thoughts on Can a mortgage company keep money from a homeowners insurance settlement without paying contractor?
  1. Reply
    ♥♥The Queen Has Spoken♥♥
    December 20, 2011 at 4:31 pm

    Since the check was written to the owner and the mortgage company who ever cashed it can do what ever they want with it.

    Sue them for payment.

  2. Reply
    December 20, 2011 at 4:51 pm

    depends. who authorized the repairs?

  3. Reply
    Spock (rhp)
    December 20, 2011 at 5:18 pm

    file your contractor’s lien on the property immediately. [you did file the necessary building permits and forms, yes?]

    then sue. you argument in court is that because your work was necessary to get the house into salable condition, your lien should be paid before the mortgage, just as if the mortgage company had foreclosed and hired you to repair the property.

    and get a competent attorney — who ever drew up your present contracts seems to be a fool. your contracts should have required the owner and mortgage company to bind over the payment to you in advance of you starting the work, with payment to be completed after the roof is inspected and accepted.

  4. Reply
    December 20, 2011 at 5:54 pm

    It’s the homeowner who signed a contract with you, correct? Then it’s the homeowner who owes you. The fact that the insurance company issues a joint check doesn’t change that.

  5. Reply
    December 20, 2011 at 6:36 pm

    It doesn’t usually work that way – the mortgage company is NOT supposed to accept that check and use it for past mortgage payments. You’ll have to contact your state banking commission (which regulates mortgage companies) to see if this is legal or not.

    And you ALSO need to get a mechanics’ lein against the house, so that IF this house goes into foreclosure, YOU get paid before the mortgagee gets paid.

  6. Reply
    December 20, 2011 at 7:15 pm

    You can get a lein on the home. Thats it.
    The mortgage co has first shot at the money if the owner is behind on payments-thats why they are on there in the first place.

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