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Homeowner insurance, grant checks have banks busy

In the wake of Hurricane Katrina, there was a flurry of insurance checks made out jointly to homeowners and mortgage holders. Processing these checks and disbursements for repairs and rebuilding required extra time and care on the part of banks, especially in South Mississippi where thousands of homeowners were impacted. Soon checks will begin arriving for homeowners eligible for the Homeowners Assistance Grant Program.

One of the busiest financial institutions is Hancock Bank where the process was in place before Katrina but had not been used to that level before. “It was not big enough to be ready for the Katrina environment,” says Dan Zoble, vice president and manager of mortgage operations. “We have had an avalanche of these checks.”

He said most people probably don’t look at the clause requiring dual signatures on insurance checks for home damages, but the requirement is written into the mortgage at the time of closing.

Although Hancock Bank has these disbursements down to a manageable level now, the staff worked nights and weekends for a while. “There were no bodies to hire to help us,” Zoble said. “It was interesting to say the least. So many of our employees are in the same boat and lost their homes too.”
In light of the circumstances, he said the bank knew they would have to be more flexible. Up to a certain monetary level, the two-party checks were signed over to homeowners. Above the $10,000 mark, the bank asked for the homeowner’s insurance report and gave them funds to get started with repairs.

“We just want to make sure the property is in order,” Zoble said. “Depending on the amount of work, we send an inspector at various stages. On small jobs we may have one inspection as required by Fannie Mae, who came out with some flexibility too. Cases vary. There are more contractors working and they need to be paid often.”

The shortage of home inspectors has made a difference, too. “Weeks could pass between ordering an inspection and getting it,” he said. “Sometimes we’d run out with a camera to make pictures.”

The work has lessened somewhat because many damaged homes north of the CSX railroad tracks have been repaired. But the work continues in the harder-hit areas south of the tracks. “We have a handful of people working on weekends now, and I see people leaving at 5:30 and 6:00,” Zoble said. “I’m glad we’re at this point and pray we don’t have to go through this again.”

Hancock Bank is better prepared and ready to handle the round of homeowner checks soon to arrive for grants through the Mississippi Development Authority (MDA). “We have worked closely with MDA through this system and believe we have a good process in place,” Zoble said. “We’ve spent a lot of time getting ready.”

He estimates that 1,000 to 1,200 of the bank’s borrowers will get the grants and the bank will make the closing process simple. The central call center will handle appointments among the 32 branch employees who will meet with homeowners face to face. The bank plans to remit payments within five business days or will put the funds into escrow accounts for the standard progression and inspection process for homeowners who want that protection.

“How to handle the process and the exact documentation has been discussed for months,” Zoble said. “They’ve (MDA) put together a good plan. We can ferret out any discrepancies.”

Asked if Hancock Bank learned any lessons from the first round of checks, the vice president answered, “Yes, particularly when it comes to things out of our control. The lack of contractors and inspectors has made it drag out longer. We still warn homeowners to be careful and to call ahead before they need an inspection. We’re better prepared than we’ve ever been before.”

Regions Bank also had procedures in place to handle claim checks prior to Katrina, according to Karen Griffis, senior vice president and servicing manager of mortgage.

“The procedures worked well with the branches located in the disaster area,” she said. “We had an influx of calls and questions and requests for available loan options that required additional hours on the staff. We had a sizeable portfolio of loans in the Katrina-affected area.”

Griffis says grant checks will be handled in a somewhat different manner from insurance proceeds. “Only certain designated branches and associates will be working with homeowners receiving grant checks,” she said. “There are requirements for the lender in handling the grant process. Therefore, associates have had to learn and establish procedures related to the process.”

Following Katrina, Trustmark Bank established two temporary loan servicing offices on the Gulf Coast specifically to accommodate customers with processing their insurance checks.

“Trustmark continues to work closely with all of our customers with their insurance checks throughout the Katrina FEMA disaster area,” said Breck Tyler, executive vice president, mortgage services manager. “Trustmark serves as the loan servicing agent for our investors, and we work with each customer based on the applicable investor’s guidelines in terms of disbursement of funds of insurance checks.”

Generally speaking, a portion of the insurance proceeds are disbursed at inception and the remaining funds are held in escrow and released as repairs are made to the home. The bank is continuing to dedicate additional staff and attention to these customers as they move towards re-establishing their home and lifestyle, he said.

Tyler said Trustmark is working jointly with MDA to assist Gulf Coast customers who are eligible for the grant program.

“We are currently in a pilot program with a limited number of customers as determined by MDA and we understand we will be servicing all of our eligible customers with their checks over the next 30 to 60 days,” he said.

Contact MBJ contributing Lynn Lofton at llofton656@aol.com.

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