Banks have yet to distribute more than $200 million of insurance money due to New Yorkers whose homes were damaged during Superstorm Sandy, a Department of Financial Services investigation found.
Many storm victims’ insurance claim checks were issues jointly to homeowners and their banks or mortgage servicers, requiring banks to endorse the checks before the funds can be released.
Gov. Andrew Cuomo announced Tuesday that his administration has sent letters to the banks, urging them to speedily release the money. The financial services department also sent letters to Fannie Mae and Freddie Mac seeking emergency reforms of their rules and policies relating to the release of insurance funds by banks and servicers.
“Families need to be able to return to their homes and the State economy, which took a hit from Superstorm Sandy, needs the boost from spending on repairs. After insurance companies have sent homeowners checks to pay for repairs, the money should not be sitting with the bank because of red tape,” Cuomo said in a statement Tuesday. “Banks need to use maximum discretion to get money into homeowners’ hands as quickly as possible.”
The financial services department has surveyed mortgage servicers about how much in insurance claims they are holding. As of late January, 27 servicers representing 95 percent of the New York market were holding proceeds for 6,611 borrowers totaling about $208 million. The four largest banks—Wells Fargo, Bank of America, Citibank and JP Morgan Chase—are holding 4,159 checks worth $131 million.
“In December, we reached an agreement with the banks that resulted in freeing up a portion of insurance funds. But we are seeing now that the money is still not moving as quickly as homeowners need,” DFS Superintendent Benjamin Lawsky said. “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.”