Mortgage won't release insurance funds until we get a bond

We’re a general contractor in Texas. We are restoring a home that got flooded in June. Insurance company estimated about 90k in damages and released funds to my client’s mortgage company. Approximately 27k were released to the homeowner and then homeowner released that amount to us. Mortgage said another 20k would be released (now with both our name and homeowner’s name on the check) upon us submitting waiver of lean, general liability, contract, and our estimate of the damages. Then another 20k would be released after a 50% completion inspection done by the mortgage. There would be a final inspection after which the remaining amount would be released.

We submitted all the paperwork needed immediately and confirmed with the claims dept from the mortgage that they had everything they needed. They informed us two checks would be released since the 50% completion inspection had just been done so for us to give it about a week before both checks arrived. This was for the 20K we were to get after submitting all paperwork and the 20k for being halfway done with work.

I call a few days later just to make sure everything was going well and I’m told the two 20k checks are on hold because they don’t have a copy of our general liability insurance. After an hour of insisting it was submitted weeks ago, they “found” it but now said “oh, but now we need your bond information before releasing the checks.” I explained to them that all they had required was my general liability but he insisted we needed a bond, he didn’t know what kind, and when asked for what amount, he hesitantly said “any amount.” I spoke to a supervisor who seemed just as lost and he explained it was a new policy that began in April 2018 that contractors need to have general liability and have a bond for the project before releasing funds. I asked what kind of bond I needed and he said “just any bond” for “just any amount.” After I attempted to get a bond and explaining what I was told, the bonding company rep laughed and asked if the mortgage had any idea what they were talking about. Bonding company said they needed to know what the bond was supposed to guaranteed so they would know what kind and a specific amount. I called back and after the rep “researched” he told me a Surety Bond that guaranteed the work would be completed and done well but that he didn’t know what amount. Another rep later, a Surety Bond that “could be” for the amount of the project but was up to me and homeowner.

Now I’m stuck trying to get a bond and being questioned why I need a bond in the middle of a project by bonding companies. They see me trying to get a bond at this point (halfway) as a red flag so I have been unable to get one. The mortgage has now began asking for my clients’ (him and his spouse) financial information such as proof of income along with our bond as a requirement to release funds. It seems as though they are continuously putting roadblocks to not release the insurance funds. We’ve never encountered this problem and I’ve been working with insurance companies and mortgage companies for years.

I was told a performance bond could run me anywhere up to 5k for a 90k job like this one.

Has this happened to any of you and how did you resolve it? Any ideas, advice, suggestions are appreciated.

Thank you in advance.

This is kind of a weird one. Most the time, municipalities are the ones that require us to put up a bond. We don’t take money up front, on any projects, unless they are custom order, ( Metal roofs cut to length, custom shingles}, therefore, a bond is not required. I think you will find the out of state mortgage companies don’t realize, Texas doesn’t require contractors to be licensed, bonded or insured. It’s generally a dead giveaway, when you see a contractor in Texas that has the words, Licensed on the roofing truck, they are a fraud.
I would simply tell them, that you are working under the contracting laws of Texas. A surety bond is not required. See if that works. They may be asking about a labor and material bond, since you have taken a money draw. About 5 years ago, I had Wells Fargo, hold a check from a home we re-roofed and completed. It was around 5k dollars. They wouldn’t pay without a copy of our license and a bond. I found they were in Georgia. I told them, Texas doesn’t issue license for any contractor. That includes, Builders, framers, concrete, roofers, painters etc… I ask why and how could I buy a bond on a project that was finished and no money was paid down? A bond is to guarantee the company you hire, will finish the project. If they don’t, the bond company pays the fee. They had the General liability, but wanted more. It’s a crazy deal. if the average customer, knew the struggles we have to go thru, just to stay in business, they would quit hiring the cheapest guy on the block. Good luck with the mortgage company. Hopefully someone smarter than me will chime in.


It’s the Homeowner’s responsibility to get the money, not yours. The HO has the contract with the Mortgage Company and they have a contract with you. The HO is responsible for payment to you. Have them tell the mortgage company you have given them two weeks to make payment prior to placing a lien. Mortgage companies don’t like liens. Unfortunately, this is what you have to resort to sometimes with these scumbag mortgage companies.

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Thanks to both for your help. We’re still working on the same project but wanted to provide an update. After speaking to a bonds specialist, he advised me that after the mortgage company released the first check without a bond, they waived the need to have a bond. He said no one would bond us when the project had already begun. The example he gave me was that it would be like trying to buy home insurance while the house is already on fire. Trying to get bonded on a job that was started was a red flag. After many calls to the mortgage company, they finally made an exception and released the next payment. Unfortunately right now we’re still stumped as they will not release the final check until they send an inspector to confirm 90% completion. Even though I call daily, we’re going on 3 weeks and still waiting for their inspector to call us and schedule an appointment.

Know it’s an old post just curious if you ever figured anything out as I am currently in the same predicament.

There should seldom be a predicament. Your contract is with the Homeowner. You have no legal standing with the HO’s mortgage company and they generally shouldn’t speak to you due to HIPPA regulations. Give the HO your invoice and let them know the clock is ticking and it is up to them to deal with their mortgage company. Their mortgage company won’t be happy if you file a lien.

I having same issues with a FL mortgage company and I live in MO. My roofer doesn’t have a license (isn’t required) and they provided all docs required. The mortgage company keeps dragging their feet and won’t give me ANY money to pay the roofer, continually coming up with reasons why the paperwork isn’t accepted. The roofer can’t order the custom metal hand stamped roof to be made, for my 1880’s historic home, without payment of some kind. They have even agreed to accept less than the agreed upon down payment to try to speed up the process.

Now the mortgage company is asking for a surety bond for the amount of the contract. In 30 years the roofing company hasn’t seen this. They also wanted my roofing company to sign every page of their OWN contract, AFTER the fact, when we were the ones to sign and initial showing we agree to the scope of work to be performed. This is insane! Then mortgage company telling me I’ll have to choose another roofing company after I’ve already paid them money down (part of my deductible!) and my insurance company has already signed off on everything!!!

Mind you, this was a 7 month process just to get insurance to approve a whole new roof!!!

I am beyond flustered pissed and annoyed at what I have gone through as the HO trying to get the money so I can pay the roofers so the roof can start being fabricated!!!

Any insight?