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I currently own a home in Florida that has a confirmed sinkhole. The insurance company was very difficult to deal with so we hired a lawyer. The entire process took five years to get a settlement with the insurance company.

As a part of the settlement, two checks were issued based upon the payoff amounts of our first and second mortgage, roughly $160K. Our home, because of the sinkhole is now appraised at $53k.

The bank, CapitalOne, will not accept the checks. This has been five months now. They have not given any reason why, but off the record, a manager said its because we are asking that the lawyer be paid from the checks. The manager said, "Hey, we never asked for a lawyer." I rebutted that they wouldn't even have these checks if it wasn't for the lawyer.

I can't seem to move this along and another part of the bank is really pushing for foreclosure, which I have held at bay with a motion to dismiss because we have the checks to settle. A hearing comes up in a few days regarding that motion.

I think they are trying to force us to settle a different way and using the foreclosure to do so.

What are your thoughts? Any recommendations on how to deal with this situation? I thought that  having these checks would be make the process a done deal in a few days...boy was I wrong. I just don't understand bank logic!




ANSWER: Hi Steve,

Your story is missing a few material facts: has the house been a total loss, or is it still habitable? In a run-of the-mill insurance claim, the owner gets the insurance proceeds after the lender has endorsed the insurance check; is your situation different, and if so, is the lender entitled to part of the proceeds?

Let me know.


---------- FOLLOW-UP ----------


The settlement was not for the maximum amount of the policy. No one has referred to it as a total loss and it is indeed habitable as we are still living in it.

We are entitled to the proceeds, but we wanted to settle with CapitalOne to satisfy the mortgage as best we could.

Do you suggest another plan of action? We are behind by 16 payments on our mortgage loan.

I hope this additional info helps.

-- Steve

Steve, it seems to me that in your situation, the lender has the upper hand. You do not have any strong negotiating points, due to the fact that there is an insurance check in the picture. Once you agree to make up the 16 payments, the lender can no longer withhold the endorsement of the check and you are free to pay your attorney.

Obviously, you are trying to negotiate more than that. Had there been no insurance check in the picture, that could have been a possibility; but with the insurance check, the bank lacks any motivation to modify the terms of the settlement.

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Eric Forster


Did your last mortgage broker or lender trick you into a messy situation which could cost you your home? I've been close to 30 years in the mortgage industry, and I've seen it all. Believe me, it is not pretty. As the owner of a mortgage company I am called frequently to testify as an expert witness in mortgage fraud cases and other cases where lenders did not fully disclose the terms of the loans they were offering to the borrowers. I have seen fraud being committed by borrowers - and by lenders. It's a tough world out there. And by the way - you are invited to visit my website,


More than 25 years in loan production and underwriting in Southern California.

Mortgage Bankers of America (Southern California Chapter)

Former columnist for AOL Financial Center and the author of a mortgage primer.

MBA (Finance)

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