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Banks release $112M to fix Sandy-wrecked homes
Banks and mortgage servicers have released $112 million in insurance settlements to superstorm Sandy victims since agreeing two weeks ago to relax regulations that have left homeowners struggling to repair their homes, state officials said Friday.
Fifteen banks have now agreed to a request from the state Department of Finance to release 75 percent of settlements directly to homeowners who are current on their mortgage payments. Previously, most banks and servicers would release a maximum of 50 percent and hold the rest in escrow accounts to check against fraud and guarantee that homeowners use the money for repairs.
Insurance companies regularly issue large settlement checks jointly to homeowners and their mortgage lenders, which dispense some money up front and release the rest gradually as work on homes progresses. But the practice has been difficult for homeowners in the wake of Sandy, leaving them struggling to rebuild months after the storm.
In many cases, banks are following rules set by mortgage giants Fannie Mae and Freddie Mac, which own about 65 percent of home mortgages. At the urging of state officials, the agencies relaxed some of those regulations last month, prompting banks to start releasing more money.
Settlements held by banks peaked in February at $306 million and are now down to about $220 million, officials said. Banks have disbursed 83 percent of the insurance proceeds they have received, up from 77 percent in February.