Short answer: If the house has a mortgage, expect the mortgage company on the insurance check: the policy’s mortgage clause makes dwelling payments payable to the homeowner and the lender together. The lender’s loss draft department endorses the check and often holds the money, releasing it in draws after inspections. Plan the job around that schedule from the day you sign.
I build CRM For Claims, and when I look at a company’s board with them, one of the most common entries is a claim that has been approved and not paid. Very often the lender is the reason. The carrier did its part, the scope is agreed, the check exists, and the money still does not move, because a third payee that nobody at your company has ever spoken to has to sign it first.
Below: why the lender is on the check, what its loss draft department does with it, what it wants before releasing anything, and how to schedule a job around money that arrives in pieces. Where the rules are public I quote them; where they vary, I say so.
Why is the mortgage company on the insurance check?
Because the homeowner’s policy tells the carrier to put it there. A standard homeowners policy carries a mortgage clause that makes dwelling and other-structure payments payable to the homeowner and the lender jointly. The lender has money lent against the house, the house is damaged, and the clause makes sure the repair money actually reaches the repair.
In the widely used ISO homeowners form, the clause says that when a mortgagee is named, losses under Coverage A and Coverage B are paid to the mortgagee and the insured “as interests appear” (IRMI walks through the full wording). Coverage A is the dwelling and Coverage B is other structures: most roofing and restoration money.
The mortgage backs this up from the other side. The standard Fannie Mae/Freddie Mac uniform instrument lets the lender hold insurance proceeds until it has inspected the property “to ensure the work has been completed to Lender’s satisfaction,” and pay them out in one payment or in progress payments. So the homeowner signed two documents, years before your first visit, that put a bank between you and the check.
| Payment | What it pays for | Lender usually a payee? |
|---|---|---|
| Coverage A — dwelling | Roof, siding, drywall, flooring, the structure | Yes, when a mortgagee is named |
| Coverage B — other structures | Detached garage, shed, fence | Yes, same clause |
| Coverage C — personal property | Contents: furniture, clothing, electronics | Usually not |
| Coverage D — loss of use | Hotel, meals, extra living costs | Usually not |
| Recoverable depreciation on the dwelling | The holdback released after the work is done | Yes — it is still dwelling money |
That is the standard form. Carriers file their own versions, so the homeowner’s actual policy is what governs. And a second mortgage or a home equity line can put a second lender on the payee line; under the standard clause, multiple mortgagees are paid in the order of their mortgages. Two lenders means two endorsements.
What does a loss draft department do with the check?
It is the servicer’s team for insurance money. It endorses the check, then either hands the whole amount back to the homeowner or deposits it into a restricted account and releases it in stages as the repair is inspected. Which one happens depends mostly on two things: the size of the claim and whether the loan is current.
Those rules are set by whoever owns the loan, and for loans owned by Fannie Mae they are public, in Servicing Guide section B-5-01. In short:
- Loan current, or under 31 days late, at the time of the loss — the first release can be the greater of $40,000, 33% of the proceeds, or the amount by which the proceeds exceed what is owed on the loan. The rest follows periodic repair inspections, and no final inspection is required.
- Loan 31 or more days late — $5,000 or less can go in one payment. Above that, the first release is 25% of the proceeds, capped at the greater of $10,000 or the excess over the loan balance. Later draws of up to 25% each follow inspections, and there is a final inspection at the end.
- Money not yet released sits in an interest-bearing custodial account.
Run a $28,000 roof claim through that. On a current Fannie Mae loan, the servicer can release all $28,000 at once, because $40,000 is the larger number. If the same homeowner was 31 days behind when the loss happened, the first release is 25%, which is $7,000, and the other $21,000 comes out in inspected pieces. Same roof, same scope, same carrier, and a completely different cash-flow plan for your company, decided by a fact you would never think to ask about.
Treat those figures as an example of the shape, not a promise. FHA, VA, Freddie Mac and banks that keep loans on their own books each set their own rules. Some states add rules on top: California, for instance, now requires lenders holding loss draft funds on one-to-four-family homes to pay at least 2% simple interest on them (AB 493, 2025).
What does the lender need before it releases the money?
Typically: the check endorsed by every named payee, the carrier’s settlement letter or estimate, your signed contract and W-9, and the servicer’s own claim form signed by the homeowner. Later draws usually need an inspection and lien waivers. The list varies by servicer, so get theirs in writing at the start instead of learning it one rejection at a time.
- Every endorsement on the payee line — both spouses if both are named insureds, and every lender. A check missing one signature comes back.
- The carrier’s settlement letter and scope — the servicer reviews the repair plan against it.
- Your signed contract and W-9, and often your license and insurance certificate.
- The servicer’s loss draft form, signed by the homeowner. Their form, not a generic one.
- For each later draw — an inspection request once the milestone is reached, and lien waivers for what has been paid so far.
Nearly everything on that list is already in your file on the day the carrier pays. The weeks disappear because it reaches the lender one piece at a time: the check this week, the contract after they ask, the W-9 after they ask again. Send it once, as one packet, and write down the date you sent it.
Two more things belong at the kitchen table, not three weeks later. Most servicers will not discuss a loan with a contractor until the homeowner signs the servicer’s third-party authorization, and without it you cannot chase anything. And take the servicer’s name from a current mortgage statement, because loans get sold and the lender named on an older policy can be out of date. You do not need to ask whether they are behind on payments: the servicer will explain its release process to the borrower.
Where do these claims actually stall?
Rarely inside the lender’s office. They stall in the gaps either side of it: a check in a kitchen drawer, a missing signature, a packet sent in pieces, an inspection nobody requested. From your office each one looks the same — the carrier paid and you did not — which is exactly why they sit.
| Where it stalls | What you see from the office | What prevents it |
|---|---|---|
| The check never left the house | The carrier says it paid; the lender has nothing | Ask the day it issues who is mailing it, and where |
| A payee has not endorsed | The lender sends the check back | Read the payee line the day it arrives, not after it bounces |
| Packet sent in pieces | “Still waiting on documents,” for weeks | One packet, one date, logged on the claim |
| Draw inspection never requested | Work finished, draw not released | Request it the day the milestone is reached |
| Outdated lender on the check | A payee that no longer services the loan | Confirm the servicer from a current statement at signing |
The first row often looks like a homeowner going quiet. As I wrote in keeping a claim moving when the homeowner stops responding, a homeowner who does not know the lender is on the check usually just thinks the money has not arrived, and has nothing to tell you.
How should you plan a job around the draw schedule?
Treat the lender’s release schedule as the job’s payment schedule. Decide at signing what you will buy and install before the first release, and do not front materials for a whole job when the first release may be a quarter of it. The final draw and the depreciation release will both wait for an inspection.
The depreciation part catches people. Recoverable depreciation is dwelling money, so when the carrier releases it after completion the lender is on that check too, and it needs a second endorsement after the crew has left. If your final invoice assumes otherwise, it will age. The sequence of ACV, depreciation and deductible is laid out in tying invoicing to the work that was approved; the lender adds a gate to both carrier payments in it.
Deposit limits and progress-payment rules are state law, so how you word payment terms is a question for your attorney, not for me. Whatever you write should not assume money arrives faster than the lender releases it.
On the pipeline side, give the lender its own stages rather than a note inside “Approved”:
- Check issued by carrier — with the date, amount and every payee name.
- Check with the lender — the date the packet went, and what was in it.
- Draw inspection requested — one per milestone, with the date asked.
- Final release received — including the depreciation check.
If “waiting on the lender” lives in a note, you cannot count how many claims are sitting there or for how long. If it is a stage, the answer is on the board.
What the software should do about it
Mostly, keep the lender visible. In CRM For Claims every project has a Mortgage tab alongside the Claim tab: one entry per loan, kept in order, with the mortgage company from your Mortgage Companies directory, the loan number and the borrowers, plus its own notes and files.
Stages use your own wording, so “Check with the lender” is a real stage that can create the next task. The packet goes out through the Documents Hub with a sending history, and a partial release shows as a partial payment on the same project’s invoice.
What it will not do is make a servicer faster or phone a loss draft desk for you. That is still a person with a claim number and a deadline. If you are weighing this against a general-purpose tool, the side-by-side comparison shows where the difference actually is. And if most of your jobs are cash work or paid-off homes, skip every stage above: “Approved” to “Paid” is fine when there is no bank in between.
If you want to see a claim with the lender, the packet and the partial releases on one screen, book a live walkthrough and bring a claim that is stuck at the endorsement. It is a good test of any system, including ours.
