Homeowner in bankruptcy, Wells Fargo holding roof funds

We just had a homeowner contact us and tell us he is in bankruptcy. His mortgage company, Wells Fargo, is not releasing the insurance funds for the completed exterior project because of this.

Does anyone have any experience with this? Will Wells Fargo release the funds for the completed work to us, or will it get rolled into the bankruptcy?

How much money is involved?
Here’s what I would do:
Before it goes bad with the owner get a letter allowing Wells Fargo to speak with you about the work and the money.
Place a lien on the property immediately, and send both the owner and Wells Fargo a copy. Find out and follow the lien laws in your state.
Go to the court house and get a copy of the warranty deed. It likely describes how insurance funds will be used in the case of a loss.
Call Wells Fargo and discuss the work and payment. It is likely that they want you paid.

It sounds like a could be a fair amount of money. I like most of what Sentry recommended, especially the part about getting the HO to sign a letter of authorization to allow you to speak with Wells Fargo. However, I would highly recommend getting a consult with an appropriate Attorney.

Here’s my amateur legal opinion, so take that for what it’s worth - which is very little. I believe you just became a creditor. Your “loan” isn’t secured. I suspect the fact that Wells Fargo has “insurance money” has very little to do with anything as far as helping your case. Worse yet, your “loan” to the debtor is unsecured.

If they’re filing chapter 13, you may still get your money, you’ll just have to wait for it to be paid off over whatever time period the court allows (usually 3 to 5 years).

You may, or may not, need to file a lien. It may be that a lien is of no use to you and therefore, would just be a waste of additional funds. Again, this is something a qualified Attorney could advise you about. I’d see one ASAP

I’m sorry to hear about this issue for you. We’ve had this happen with one Customer. Thankfully, it was only around $1,400 as they had paid a deposit and the recoverable was quite minimal. I just wrote it off and moved on due to the small amount figuring I’d spend more time and money that it was worth to pursue.

You need to file a lien ASAP. Typically, there are strict time frames to be able to do that. A lien is going to be your main source of leverage in this matter.

I guarantee you that the bank applied that insurance check to a mortgage balance that was already in arrears. That is their right to do so.

I suspect that if the mortgage company did not release funds that this homeowner is substantially behind in payments and this will eventually end up in foreclosure. That process can take a bank a minimum of 18 months from the time that proceedings begin. If the homeowner disputes any part of the foreclosure proceeding the situation can go on for multiple years.

You need to make a demand to the homeowner for your bill. I would send both regular and certified letters. Hopefully, you have a written contract. Time is your enemy and a lien is your friend.

Putting a lien on the property prevents the homeowner from “short selling” the property unless you get your money. Further, if the bank forecloses, they inherit the lien and would also have to address this at the time that they sell the property.

Frankly, it looks like you will not get your money anytime soon.

[quote=“jtdew”]You need to file a lien ASAP. Typically, there are strict time frames to be able to do that. A lien is going to be your main source of leverage in this matter.

I guarantee you that the bank applied that insurance check to a mortgage balance that was already in arrears. That is their right to do so.

I suspect that if the mortgage company did not release funds that this homeowner is substantially behind in payments and this will eventually end up in foreclosure. That process can take a bank a minimum of 18 months from the time that proceedings begin. If the homeowner disputes any part of the foreclosure proceeding the situation can go on for multiple years.

You need to make a demand to the homeowner for your bill. I would send both regular and certified letters. Hopefully, you have a written contract. Time is your enemy and a lien is your friend.

Putting a lien on the property prevents the homeowner from “short selling” the property unless you get your money. Further, if the bank forecloses, they inherit the lien and would also have to address this at the time that they sell the property.

Frankly, it looks like you will not get your money anytime soon.[/quote]

I’ve heard more than one story about houses, with standing liens, being sold/closed with the liens being ignored and the lien holder not being contacted whatsoever.

jtdew may very well be correct with his recommendations. If what you’re owed is much money, I’d contact an Attorney.

Whether to file a lien or not may be state dependent. Here in GA I can file a lien for $5.00. Literally.

The lien definately will prevent the owner from selling the property without paying you, either straight out or as a short sale. However, that protection is somewhat short-lived; here in GA we have one year to “perfect” a lien. That is, we have a year to file suit and win judgement or the lien goes bad.

The warranty deed often spells out how insurance funds are to be used. It is true that mortgage companies may apply the funds to the mortgage, and if the deed allows that you may be sunk. If not, that will let you know if you have leverage and that an attorney may be warranted.

My experience has been that mortgage companies want clear title and will pay you. I have heard some nightmare stories of contractors getting stiffed as well.

Because a first mortgage holds the primary lien position on a property, a foreclosure wipes out all other positions that come after, whether it be a lien or an actual judgment. That means that if a foreclosure is completed then your lien or judgment no longer exists against the property. A judgment would still stand against the owner, however, unless it is wiped out in the bankruptcy.

Coroofer - Did you or the policyholder establish the project funds with the Insurance Company?