Mortgage company withholding insurance proceeds
Have you found a general contractor to rebuild your home? I would imagine that someone with a bit of expertise in the area is used to dealing with insurance companies, floating the money for a rebuild, and hitting the gates to receive payment for work accomplished.   Business are used to not receiving payment when work is accomplished and it is part of the risk of being in business.  They have to buy materials and pay employees with the expectation of payment in the future.  Much like workers go to work on a Monday for the work that day, three Friday's later, business often have to float costs but for longer periods of time. If you are looking to be your own general contractor then you will have to float the money on your own. The money should not be used for living expenses or mortgage payments, it should be used for down payments in order to get the work of rebuilding started. My question is, how do you rebuild a home, without the money to rebuild the home? I ignorantly thought that was why we paid for insurance. The reason that you have insurance is so as to keep the mortgage lender from losing money.  That's why you buy the insurance through the mortgage lender and they get paid.  Without the insurance, you'd have no home but still have a mortgage.  You'd either have to pay off a mortgage with no house or have to declare bankruptcy to shed the mortgage.   You essentially have two paths.  If you (or the builder/suppliers) can afford to float the cost, you can rebuild the original house.  You'll eventually get the $161,000 and can pay off the builder and suppliers.  This may involve taking out a construction mortgage to refinance the original mortgage.  Presumably the construction mortgage would be with a different lender.   The other path is that you can sell the existing property as is, and use the insurance and proceeds to pay off the existing mortgage.  Then you'd have no house and no mortgage.  You start over and buy a house with a mortgage.   It's possible that your insurance payoff isn't enough to pursue either path.  Then your option is to get the insurer to make a bigger payoff.  This may involve suing them.  Note that you may be able to talk the government into suing the insurer for you.  They do have regulators who can review things.  If you can't get government action, there are lawyers who will do the suing and take their fees out of their winnings. Fire insurance, as you have discovered, is a complete ripoff. Most people pay fire insurance all their lives with no benefit whatsoever, and those such as yourself who are lucky enough to get a payout find that it is completely insufficient to replace their loss. I once computed the actual beneficial net present financial value of my fire insurance policy and it came out to $40 per month. The cost was $800 per month. That is typical. Homeowners pay $500 to $800 per year for something that is worth $30 to $50 per year. Ironically banks would actually make more money from mortgages if they did not require mortgagees to buy insurance, but nevertheless they insist on it. It is not about logic, but about fear and irrationality. When I paid off my mortgage and gained ownership of my home the first thing I did was cancel my fire insurance. I now invest the money I would have wasted on insurance, making money instead of losing it. Being compelled to throw money down the toilet on fire insurance is one of the hidden costs of a homeowners mortgage in the United States. In your situation, the main option is to borrow the money to rebuild the house using the land as collateral, if the land is valuable enough. Of course, you still owe the money for your original mortgage on your now (non-existent) home. So, to get a home, you will have to have the income to service two mortgages. A loan officer at a reputable bank can tell you whether you have the income necessary to support two mortgages. If you were maxed out on your original mortgage, then you may not have enough income and you are screwed. In that case you will have to go back to renting and gradually paying off your old mortgage. (If it were me, I would sue the insurance company pro se as a way to get the necessary money to rebuild the home, because insurance companies roll over like a $20 hooker when they get sued. Juries hate insurance companies. But I am unusual in that I love courtrooms and suing people. Most people are terrified of courtrooms though, so it may not be an option for you.)
Higher life insurance.  Mortgage insurance is a very expensive decreasing term life insurance policy, that pays the Lender. You can likely increase your limits for less cost, AND, the payout doesn't depreciate every month, AND, your beneficiary can use the money any way they want - to buy food, or pay property taxes, or whatever. There seems to be a contradiction here: Home warranties not worth paper they're written on and: What struck us is that the HWC [...] immediately had the unit replaced. There is a huge difference when you buy the insurance yourself and when a bank forces you to buy one. Because in the latter case, the insurance is not for you, it's for the bank to protect their collateral (which is your asset as well). It becomes obvious when a claim comes up, because the insurer is not negotiating with you, it's negotiating with another large financial institution. And as far as the stereotype of banks being ruthless behemoths goes, in this case you happen to benefit from being on the behemoth's side and the insurer simply can't brush off a bank as much as it can brush off a person like you. As you've put it, a house in Phoenix without AC is not worth much, so the bank could not let that happen. Because in case of another foreclosure they would have to fix the AC anyway. First, you are reading that document correctly, but it's not 78% of original mortgage. It is actually 78% of original home value.  For example, if the home was valued at $100K when you bought it and you received a $90K loan, PMI must be removed when you owe $78K, not 78% of $90K. To make matters worse for the bank, they missed the required timing to drop PMI. I would print the document you referenced, cite the applicable portion, and tell them if they do not comply, you will report them for failure to comply. For example,  I'm sure I am not the only one in this situation, and the FDIC will be   eager to assess the huge fines they can collect from a bank that isn't   operating within the law. Something like that. The key question is whether this number includes taxes and insurance. When you get a mortgage in the U.S., the bank wants to be sure that you are paying your property taxes and that you have homeowners insurance. The mortgage is guaranteed by a lien on the house -- if you don't pay, the bank can take your house -- and the bank doesn't want to find out that your house burned down and you didn't bother to get insurance so now they have nothing. So for most mortgages, the bank collects money from the borrower for the taxes and insurance, and then they pay these things. This can also be convenient for the borrower as you are then paying a fixed amount every month rather than being hit with sizeable tax and insurance bills two or three times a year. So to run the numbers: As others point out, mortgage rates in the US today are running 3% to 4%. I just found something that said the average rate today is 3.6%. At that rate, your actual mortgage payment should be about $1,364. Say $1,400 as we're taking approximate numbers. So if the $2,000 per month does NOT include taxes and insurance, it's a bad deal. If it does, then not so bad. You don't say where you live. But in my home town, property taxes on a $300,000 house would be about $4,500 per year. Insurance is probably another $1000 a year. And if you have to get PMI, add another 1/2% to 3/4%, or $1500 to $2250 per year. Add those up and divide by 12 and you get about $600. Note my numbers here are all highly approximate, will vary widely depending on where the house is, so this is just a general ballpark. $1400 + $600 = $2000, just what you were quoted. So if the number is PITI -- principle, interest, taxes, and insurance -- it's about what I'd expect. I believe you may be missing the point here. It appears(and they don't really verify this) that before BofA took over the loan, the homeowners were not using an escrow account. I know this is possible because i had the option of using one or not when i bought my house. So it seems that once BofA took over they automatically created an escrow account and when the normal payments the homeowners were making didn't cover the total monthly balance, they took it out of the payment specifically for the mortgage.   So, according to THIS story, its not sensational bullshit. This would be the bank creating an issue. That is, according to the facts that are presented in the article, which may not be the whole story....  Edit- spelling &amp; grammar With a $40,000 payment there is a 100% chance that the owner will be claiming this as a business expense on their taxes.  The IRS and the state will definitely know about it, and the risk of interest and penalties if it is not claimed as income make the best course of action to see a tax adviser. Because taxes will not be taken out by the property owner, the tax payer should also make sure that the estimated $10,000 in federal taxes, if they are in the 25% tax bracket, doesn't trigger other tax issues that could result in penalties, or the need to file quarterly taxes next year. This kind of extra income could also result in a change or an elimination of a health care subsidy. A unexpected mid-year  change could trigger the need to refund the subsidy received this year via the tax form next April. You would need to check the original mortgage papers you signed with the originators.  Chances are you agreed to allow the mortgage to be sold and serviced by other parties. Refinancing would also put you in the same boat unless you got them to take that clause out of the mortgage/refinance papers. Also, chances are most small banks and originators simply can not keep mortgages on their books. There are also third parties that service loans too that do not actually own the mortgages as well. This is another party that could be involved out of many in your mortgage.  I would also not worry about 127/139 complaints out of 1,100,000 loans. Most probably were underwater on their mortgage but I am sure a few are legitimate complaints.  Banks make mistakes (I know right!).  Anyway, good luck and let me know if you find out anything different. "In the United States if the person insures an article and then claims a loss of that article, the insurance replaces the missing/destroyed article. If later on the item is found the original is owned by the insurance company. The person who purchased the policy doesn't get to keep both.  Of course if the item was so valuable to be priceless the insurance company would be open to an exchange of items or money.  But if they suspect fraud...then it becomes a legal matter. Even when a life isn't involved it can be a source of dispute: http://www.artnet.com/magazineus/news/spencer/spencers-art-law-journal5-7-10.asp INSURED V. INSURER: WHEN STOLEN ART IS RECOVERED, WHO OWNS IT? Kenneth S. Levine  This essay is about the word ""subrogation,"" which frequently appears   in insurance policies. An insured painting is stolen and the insurance   company pays the owner’s claim for the value of the painting. Many   years later, when the painting is recovered, its value is many times   what it was when the insurance claim was paid. The insurance company   takes the position that it owns the painting, while the owner says I   own the painting, less the value of the insurance proceeds received.   The resolution of this dispute depends on the meaning of the word   ""subrogation"" in the insurance policy. When life insurance is involved, the item being replace is the lost stream of income. The question of returning money and how much would be a legal issue. They would also want to know if there was fraud, and who was involved." You likely received the shares as ordinary income for services of $10k, since they withheld taxes at granting.  Separately, you likely had a short term capital loss on sale of $2k, since your holding period seems to have been under one year. I think the statute of limitations is 2 years so I suspect that she may not qualify, also BOA was not the last bank to hold her mortgage.  I doubt she'll receive anything. She's just glad the whole mess is behind her. Good! The article says it was some kind of collateral protection insurance that customers were signed up for despite it being unrequired for the loan. The accusations is that WF racketeered about 800,000 loans by bundling in this bunk insurance cost as part of the loan structure. I'm glad you're not caught up in it. There are two scenarios that I see. You have a mortgage on the property. Generally the insurance company sends the funds to the lender, who then releases the funds to you  as you make the repairs. They do it this way because if you never make the repairs the value of the collateral is decreased, and the lender wants to protect their investment. There is no mortgage. You will get the funds directly, and the insurance company will not force you to make the repairs especially if the repairs are cosmetic in nature.  In either case if you don't fix the cause of the leak, and make repairs to the site around the leak, you will run into a problem in the future if the leak continues, or the rot and mold continues to spread.  If you file a future claim they are likely to ask for proof of the original repair. If you didn't make it, they are likely to deny the second claim. They will say the cause is the original incident and if you had made the repair, the second incident wouldn't have happened. They are likely to drop you at that point. If you try to sell the house you will have to disclose the original leak, and the potential buyers will want you to make the repairs. Any mold or rot spotted by the home inspector will be a big issue for them. It is also likely to be an item that they will be advised to demand that you get a legitimate company to make the repair before the deal can move forward, and won't negotiate a lower price or a credit for $x so they can get the repair done. Some will just cancel the deal based on the inspection report. I understand where you're coming from but you're mostly just quoting the plaintiff's attorney. That's not going to be the source of unbiased information. Furthermore, I don't trust general news sources when it comes to complex financial reporting. I don't really even trust business journals as they are mostly filled with j degrees without real experience. Bankruptcy cases can get very complex and unpredictable because judge's have significant leeway; you really need to read the case opinion to see what really went down. I work in finance and deal with bankruptcies on a semi-regular case. I am on the buy side (the side that would be screwed in cases like this) so my inherent bias goes your way against poor management.   If this guy actually moved assets from company 1 to company 2 at a non-arms length transaction then that is misconduct and assets can be recovered from company 2 usually. If Learning Annex was pari passu with Robert and he pulled dividends out to himself, that is misconduct that will be punished by a bankruptcy court. If he did these things they are not smart business practices, and will be punished.  Your condescension does not help your case. I most likely know far more about this topic than you, as I have seen the nuances corporate bankruptcies take on in the real world. I just don't trust grossly oversimplified reporting in a case that is ongoing. All transactions involving fraud or theft are void by their nature. Title to your money never changes hands.  You are entitled by law to have assets stolen from you returned to you. In cases of negligence or broker malfeasance, lawsuits or SIPC protection are your primary recourse. That is your bill because the services were performed for you.   You still can negotiate with the doctor however.  Suggest that while you aren't willing to pay the full share, you will pay the negotiated amount he would have actually gotten from the insurance company (or some fraction thereof).  Doc did make a mistake, but you are very much liable for it.