Bank Expedited Foreclosure to File Insurance Claim?
Posted 30 January 2013 - 08:45 PM
A year ago my home was destroyed due to the negligence of a neighbor who failed to maintain his property. My wife and son were nearly killed, but thankfully escaped injury. We lost our home, our car, and were forced to live for five months in a one-bedroom hotel room until we could find a new home. I run my own business, and while fighting the insurance company's attempts to stall and deny our claim, wound up on anti-anxiety medication that severely impacted my ability to run my business. I lost the confidence of two key investors, after losing sales revenue around $25k/mo.
With the loss of income, the loss of our home and car, I was unable to make payments on our mortgage. I went to the bank and told them our story. I asked them for a temporary forbearance while we fought the insurance company, and I also asked for any help they could provide--even just a letter to the insurance company--to help us put pressure on them to settle our claim. I reasoned that, with our house destroyed and an insurance settlement in doubt, the value of the house is far below the value of the loan, so the bank has an interest in helping us pressure the insurance company to restore the home and its value. Not surprisingly the bank said they could/would do nothing to help us--until we got a settlement check, and then they'd take that check and parsel it out to us as we rebuild.
What was surprising is that the bank not only didn't offer a forbearance of any kind, they actually appeared to expedite foreclosure. After three missed payments, they started foreclosure immediately, and started setting a date for auction. Unbelievably, they scheduled our house to be sold at auction the day before Thanksgiving. I can't even begin to express the stress and the pain of going through this process. We lost our home, I nearly lost my family, my business, and now the bank was rushing to sell what was left of our house while we were still fighting with the insurance company for a settlement. It made no sense to me.
I fought incredibly hard to save my house from foreclosure at the last minute. Ironically, I reached a large settlement with the insurance company at this time, and the bank wouldn't even accept my check because the house was in foreclosure. It was surreal. I made relentless calls to the bank brass, I pleaded with local bank officials, and I came up with $25k to stop the process and get on a payment plan to restore my mortgage, but not before having to get back on anxiety medications. The bank added hefty legal fees to my payment plan to cover their costs of starting and stopping the foreclosure.
Today I think I learned why the bank moved so quickly to foreclose while denying us a forbearance, and even denying our deposit of the claim check. My claims adjuster, in confidence, told me that the bank had filed ~their own insurance claim~ on the damage to our house. It appears that they wanted to leverage the opportunity to foreclose on us and file their own claim against our destroyed house, essentially cutting out the middle man. Instead of the large check going toward the repair of our house, they could sell the house and claim the check for themselves and have a tidy exit.
I have no idea if what they've done breaks any laws, though clearly it is monumentally evil. They ignored the hardship of a long-standing customer and attempted to push us out and claim a settlement check--meanwhile billing us fees for the foreclosure process. I'm trying to figure out whether this is a viable case, or just one of the many cracks that customers can fall into without much recourse. I'd appreciate any advice.
Posted 31 January 2013 - 07:03 AM
As for your insurance company I couldn't even begin to address that without more information. You have alleged that your neighbor was negligent and that your insurance company wanted to stall and deny but that you finally did receive a "large settlement."
There's a lot of details missing but I can tell you (as an experienced claim rep) that fire claims often do take a long time to settle.
I take it that you are now holding a claim check made out to both you and the mortgage company. I hope that check is just for the house and that you got a separate check for the contents and other coverages.
Warning: Legal issues are complicated. Explanations and comments here are simplified and might not fully explain the ramifications of your particular issue. I am not a lawyer. I do not give legal advice. I make comments based on my knowledge and experience. I guarantee nothing. If you act on my comments without the advice of an attorney, you do so at your own risk.
Posted 31 January 2013 - 07:28 AM
I don't doubt that what the bank did was not illegal--as you said, they just followed the provisions of the contract. But I find it no less shocking that a bank I've been with for 15 years as a good customer would flat out refuse any assistance or even brief forbearance in the circumstance of a disaster, while going behind my back to make their own claim against my insurance. And then loading me up with thousands in legal fees for starting and ending the foreclosure. It may not be illegal, but it is dispicable.
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