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financing

Mortgage payments in thirds

The Mortgage Payment Process

The Mortgage Payment Process

by guest author Linh Pham, construction consultant

Mortgage Company Controls Insurance Funds

Once you have an agreed scope and cost of repairs and your insurance company has issued payment, for those Homeowners who have a Mortgage Loan on their home, the insurance payment will include the Mortgage company (or Companies if you have multiple lenders on the home), on the payment check(s). By law, Mortgage companies are required to be named on the insurance payment(s), as they have a vested interest in the property, namely the balance of your loan. They want to protect that interest by controlling the funds, and making sure that the money is applied to the Dwelling restoration so that their assets are protected.

You will have to contact your Mortgage company to request their proprietary forms as those forms will need to be completed by you and your Contractor. Ask the Mortgage company to send you their Loss Draft package (documents & forms) by e-mail so you can save time by not waiting for the package to arrive by US (Snail) mail. You will be instructed to endorse the payment check(s), and send it to the Mortgage company along with the estimate of repairs on which the settlement is based, the claim payment summary from your carrier, your signed Contract with the Contractor, and all the proprietary forms that they require you and your Contractor to complete. Only after they receive the above listed documents and the insurance payment check (s) will they begin their document review and funding process.

Funding for Your Construction Project

Unlike a new construction loan, where the funding is dictated by a construction draw schedule provided by your Contractor, in a fire-rebuild, the money to pay the Contractor comes from the Mortgage company. Customarily, the Mortgage company will issue the insurance proceeds in thirds.

The initial one-third of the insurance proceeds is released upon receipt of the above listed documents and the payment check(s). It is not uncommon to have to wait 3-4 weeks for that first payment to arrive. The second installment payment from the Mortgage company is issued at 50% completion of the construction, and the final one-third draw is issued at substantial completion (95% or better) of the project.

The Mortgage company will need to be notified by the Owner as the 50% and substantial completion phases approach, since they will send inspectors to verify the construction progress before they will issue payments.

Educate Your Contractor on the Payment Process

be diligent and forthright in discussing the funding process with your contractorMake sure that the Contractor with which you are working understands this process, and that they are willing to work directly with you and the Mortgage company so that these funds are released in a timely manner.

Before you sign on with a Contractor, do your best to address the funding issue with your Contractor and verify that he has enough capital to fund the project through the completion. Consider the volume of work being performed by the Contractor because if the Contractor is building 10-50 houses simultaneously, the Contractor may have cash flow issues as these projects near completion.

Be careful in vetting your Contractor to make sure that he actually has enough capital to undertake what he’s promising to do. Ask the Contractor if they have enough capital in reserves and backing or credit lines necessary to float the project through to completion, given the Mortgage companies’ payment practice.

Be diligent and forthright in discussing the funding process with your Contractor, as the way in which the Mortgage companies issue draws may not be familiar to your Contractor, especially if they have no experience with insurance restoration/repairs. Review with your Contractor the mortgage payment process as all parties have to enter into the construction agreement with eyes wide open.

If you are unclear in how the process works, and are uncomfortable explaining the process to your Contractor, you could refer them to a consultant (like Scope Writing Services) as they can also be used to help educate your Contractor on the Mortgage process. You don’t have to go through this process alone.

sba loan deadline dec 11

December 11th Deadline to Register for Disaster Assistance/Low-Interest Loans

December 11th Deadline to Register for Disaster Assistance/Low-Interest Loans

Small Business Administration (SBA) Disaster Loans are the primary source of federal long-term disaster recovery funds for disaster damage not fully covered by insurance or other compensation. SBA’s Office of Disaster Assistance is working in conjunction with the Governor’s Office of Emergency Services (Cal OES) and the Federal Emergency Management Agency to help business owners and residents recover as much as possible from this disaster.

To qualify for SBA you must have already applied to FEMA.

The SBA is providing one-on-one assistance to help business owners and residents apply for an SBA disaster loan at the the Disaster Recovery Center. No appointment is necessary.

Santa Rosa Disaster Recovery Center
Press Democrat building, 427 Mendocino Ave., Santa Rosa, CA 95401 (between Ross and 5th Streets)

Open every day, from 9 a.m. to 7 p.m.

Types of Loans

Businesses

Businesses of all sizes and private nonprofit organizations may borrow up to $2 million to repair or replace damaged or destroyed real estate, machinery and equipment, inventory, and other business assets. SBA can also lend additional funds to help business and residents with the cost of making improvements that protect, prevent or minimize the same type of disaster damage from occurring in the future.

Small Businesses and Nonprofit Organizations

For small businesses and most private nonprofit organizations of all sizes, SBA offers Economic Injury Disaster Loans (EIDL) to help meet working capital needs caused by the disaster. EIDL assistance is available regardless of whether the business suffered any property damage.

Homeowners

Disaster loans up to $200,000 are available to homeowners to repair or replace their damaged or destroyed primary residence. Homeowners and renters are eligible for up to $40,000 to repair or replace damaged or destroyed personal property.

How to Apply:

Go to the SBA Disaster Loan Assistance website to:

  • View Eligible Disaster Areas
  • Apply Online
  • Check Application Status

Applicants may apply online using the Electronic Loan Application (ELA) via SBA’s secure website at https://disasterloan.sba.gov/ela.

Disaster loan information and application forms are also available from SBA’s Customer Service Center by calling (800) 659-2955 or emailing [email protected]. Individuals who are deaf or hardofhearing may call (800) 877-8339. For more disaster assistance information, or to download applications, visit http://www.sba.gov/disaster. Completed applications should be mailed to: U.S. Small Business Administration, Processing and Disbursement Center, 14925 Kingsport Road, Fort Worth, TX 76155.

Application Filing Deadlines

Physical Damage: December 11, 2017

Economic Injury: July 12, 2018

Reposted from the City of Santa Rosa’s recovery website: https://www.sonomacountyrecovers.org/disaster-loans/