Wondering if anyone with experience getting an insurance payout when a bank is named on the policy can help?

We have a property with a detached garage that burned down. As the insurance payout is not enough to cover replacement (should have insured for replacement cost!), we are just going to demolish the garage. As a result, the insurance payout will come to us. However, the adjuster says because it's a total loss and our bank is named on the policy, they have to issue the cheque to us AND the bank. (I don't even know how this would work??) However, if we could give him a contact at the bank who will allow him to exclude the bank from the payment, then that would be fine. So far, so good...

However, our bank representative sent it to their underwriting department. At first they only wanted the Proof of Loss, Title confirmation, City property tax valuation and credit checks for my husband and myself.

Now, after doing credit checks, they know we a number of mortgages with another bank as well (which we got after the mortgages with this bank). They now want to know our annual income and the following for each of our properties (we have 10): property address, property value, condo fees, rental income, property tax, (even for the mortgages they hold), as well as the name of the other financial institution and the mortgage balance for each of those mortgages as well as our annual income. Their justification is that this is to update their files ("just like updating our phone numbers"...?).

This is basically all the information we would provide if we were applying for a new mortgage (though they are not asking for documents to verify it). I feel like this is WAY too much information, and not relevant for them if they are just giving an OK for us to receive a $16,000 cheque (our LTV on this property is about 25%, so they are at no risk just because we no longer have a very old detached garage).

Is it me or them who is being unreasonable?

Thank you!

I haven't dealt with this scenario personally but think that you are correct to say they are requesting more info than they need.
If there's a mortgage on the property, the bank always gets to be the first loss payee, which is why the insurance could include them on the payout. Assuming your mortgage is current/up to date, that cheque should go right to you (or directly onto your mortgage.)
Is your insurance held/operated by the bank, or is it private insurance with the lender as first loss payee?

If the bank is digging deep into your portfolio, use that as a gentle reminder that you can bring your mortgage business elsewhere.
Your mortgage for that property with this insurance claim is all that they should be focusing on. The insurance company can get forensic if they want to (investigate for fraud, arson, or whatever), but the bank doesnt need that info.

Annoying: yes.
Necessary: yes ( in the bank’s eyes)
Unreasonable: no.

If bank gets the cheque they will lower your mortgage accordingly. Then refi with them or another bank.

Banks getting far more anal these days. Far tougher to get good rates without full re-qualification on each refi.

Consider a commercial 60-65% LTV blanket mortgage across the ten properties.

Keep in mind the golden rule: He who has the gold makes the rules !

I have had this happen in the past and as the mortgagee I have also refused to sign over the check to the individuals involved. (They always love that!)

When the deal is underwritten it includes the value of whatever was lost in this case a garage. Now your going to just demolish the garage and not replace it. This decreases the property value. However, in your case at 25% ltv there is no risk of loss to the bank. As someone that has been on the other side of the desk it honestly sounds like they are fishing for opportunities to get more of your business. (But sometimes policy is policy regardless of the unique situation - in this case the low ltv).

The unfortunate part here is they can ask for pretty much whatever they want under the guise of protecting their interests. For example they could claim that your portfolio puts you at higher risk of default and as the banks do not like to go through that whole process they may just want to apply the funds to the mortgage and be done with it reducing their already low risk.

Playing the “bank elsewhere” card has very little effect at all and with your portfolio they may not want your business anyway. By this I mean banks are generally in the single family home business and not so much the real estate investor business. (Not a reflection on you or the quality of your holdings)

Remember they do not have to sign over the check in the 1st place, so if you want it you’ll have to jump through the hoops. The one thing I would do is ask to speak to the bank manager to ensure it’s not just an employee fishing for info and upsell opportunities that were not requested by the underwriting department.


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