Banks are sitting on more than $200 million in emergency relief funds earmarked for victims of Superstorm Sandy, a probe by New York’s insurance regulator has found.
The results of the investigation, released yesterday, found that the biggest mortgage servicers — Wells Fargo, JPMorgan Chase, Bank of America and Citigroup — are holding onto some 4,159 checks worth some $131 million.
And there’s nothing but red tape keeping victims from getting their hands on the cash, said Ben Lawsky, head of New York state’s Department of Financial Services, who undertook the probe.
“We are seeing now that the money is still not moving as quickly as homeowners need,” Lawsky said in a statement.
“While we understand there are some limits on how banks release funds, we want to make sure that they are pushing those limits and getting insurance money out quickly,” he added, noting that DFS is working with Fannie Mae and Freddie Mac to help homeowners get funds.
The money is sitting with the banks because insurance claims checks are sometimes paid out through the mortgage servicer, which is usually named on the check along with the homeowner.
Typically banks request that homeowners demonstrate that there is repair work being done or required before distributing the cash.
Most banks have claimed that they have been working diligently with victims of the October disaster.
Approximately $1.3 billion in claims have been paid out so far, according to the DFS, with $200 million stuck in the system.
Lawsky and other regulators are urging banks to use common sense — like shrinking the amount of paperwork and clarifying the process for accessing emergency funds.
Banks insist that they are doing their best to work with homeowners.