After a disaster your insurance may be used by your lender to pay off your mortgage forcible or compulsory.
How to navigate a Forced Mortgage Payoff by your mortgage lender. When your insurance payout is taken by your lender to payoff your mortgage it's to protect the lender from default, property change of ownership.
image

By Murray Wennerlund published 5-18-2022 updated 5-29-2022
| | |

III.G.2. Prohibition on forced mortgage payoff.

A forced mortgage payoff occurs when homeowners with an outstanding mortgage balance are required, under the terms of their loan agreement, to repay the balance of the mortgage loan before using assistance to rehabilitate or reconstruct their homes. CDBG-DR funds, however, shall not be used for a forced mortgage payoff. The ineligibility of a forced mortgage payoff with CDBG-DR funds does not affect HUD's longstanding guidance that when other non-CDBG disaster assistance is taken by lenders for a forced mortgage payoff, those funds are not considered to be available to the homeowner and do not constitute a duplication of benefits for the purpose of housing rehabilitation or reconstruction.

Research Resources: