A New York State Department of Financial Services investigation has uncovered that $200 million in insurance funds for Hurricane Sandy that is being held by banks has not been sent to homeowners who need the money.
The Department of Financial Services (DFS) began the investigation after receiving hundreds of complaints from New Yorkers frustrated by their banks’ failure to disburse insurance money. Homeowners say banks have either been too slow in processing paperwork or have placed too many conditions on homeowners before disbursing funds, resulting in delays to home repairs.
As of late January, 27 servicers representing 95 percent of the New York market were holding proceeds for 6,611 borrowers for a total of about $208 million. The four largest banks, Wells Fargo, Bank of America, Citibank and JPMorgan Chase, are holding 4,159 checks worth $131 million.
For homeowners, insurance checks are issued jointly to them and their bank or mortgage provider, requiring the bank’s endorsement of the check before the homeowner can access funds.
The banks may require proof of repair work before they release the funds, which have caused the delays.
“In December, we reached an agreement with the banks that resulted in freeing up a portion of insurance funds,” DFS Superintendent Benjamin Lawsky said in a statement. “We are seeing now that the money is still not moving as quickly as homeowners need. While we understand there are some limits on how banks release funds, we want to make sure that they are pushing those limits and getting insurance money out quickly.”